Microsoft Corp. is investing $10 billion in OpenAI, whose ChatGPT artificial intelligence tool has dominated the web since its release in November, attracting more than a million users in a matter of days and igniting a new discussion about the use of AI in the workplace.
The additional backing is meant to provide Microsoft access to some of the most well-liked and sophisticated artificial intelligence systems, expanding on the $1 billion Microsoft invested in OpenAI in 2019 and another round in 2021. Microsoft is vying for supremacy in the quickly developing technology that produces text, pictures, and other material in response to a brief command with Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc.
In addition, OpenAI needs Microsoft's financial support and cloud computing resources to process enormous amounts of data and run the ever-more-complex models that enable tools like DALL-E to produce realistic images from a small number of words and ChatGPT to produce startlingly human-like conversational text.
Microsoft did not disclose the specifics of the new investment, but a source with knowledge of the conversations who not to be named because the details are private said it will reach $10 billion over several years. In New York, the shares were up 1% at $242.71 at 10:39 a.m.
The agreement will benefit Microsoft's Azure cloud while giving OpenAI access to more specialised supercomputers to run its sophisticated AI models and support its research. According to blog posts from the two businesses, Microsoft intends to utilise OpenAI's models across all of its consumer and business products and to introduce new product categories based on OpenAI's research.
Anurag Rana, a Bloomberg Intelligence analyst, stated that Microsoft must fight to grow its Azure business because of the use that is made possible by this agreement. He stated, referring to Amazon Web Services' (AWS), the industry leader in cloud computing, "This might potentially help Microsoft shrink the gap with AWS further."
OpenAI stated on Monday that Microsoft's funding will enable it to expedite its independent research. OpenAI trains all of its models using Azure, a cloud-based service from Microsoft. According to the corporation, Azure will continue to be OpenAI's exclusive cloud provider.
According to two sources familiar with the negotiations, most of the value of the agreement would come from Microsoft providing OpenAI with the Azure cloud computing capacity required to power its AI systems. This is similar to how Microsoft previously invested in OpenAI.
Because OpenAI is a capped-for-profit organisation and investors there are restrictions on the return on their investment, the agreement has a sophisticated structure. According to one of the persons, Microsoft will receive almost half of OpenAI's financial gains until its investment is returned up to a set ceiling. A non-profit corporation called OpenAI, which is in charge of OpenAI, receives all revenues after paying out what is promised to investors and staff.
Microsoft Plans for ChatGPT
Earlier this month, Microsoft revealed plans to bring ChatGPT to Azure and the general release of its Azure OpenAI Service, which has only been available to a select group of users since its introduction in 2021. The service provides Microsoft's cloud users access to a number of OpenAI technologies, including the DALL-E model for creating pictures from text prompts and the GPT-3.5 language system, on which ChatGPT is built. This makes it possible for Azure users to integrate OpenAI products into their own cloud-based applications.
Microsoft itself is presently employing the programming language AI to automate its Copilot tool and plans to include such technology into its Teams chat programme, Bing search engine, Office productivity tools, and security.
As Google, which has long been virtually untouchable in search, now seems vulnerable, Chief Executive Officer Satya Nadella is strengthening Microsoft's relationships with OpenAI. The prevalent keyword query method used by the Alphabet unit searches the web for certain phrases using search engines, and then leaves it up to the user to decide whether material is relevant.
In contrast, ChatGPT provides thorough explanations in response to queries on subjects like political science and computer programming, and its question-and-answer structure enables users to go deeper until they completely grasp. In contrast to a Google search's simple list of blue links, the bot may react to requests in a natural and human-like manner, continue a conversation, and respond to follow-up questions.
Negative Aspects of ChatGPT
In contrast to that antiquated collection of links, ChatGPT has drawbacks. Unlike a search on Google or Bing, ChatGPT does not yet provide context on the sources of the data used to construct its replies, and OpenAI admits that the tool's responses can be inaccurate and shouldn't be relied upon as accurate.
Data compiled by Bloomberg show that Microsoft's most recent investment in OpenAI, at $10 billion, easily outpaces all of its prior investments, including the $5 billion it spent to purchase AT&T Inc. stock in 1999 in exchange for access to new cable networks and the $1 billion stake it acquired in Comcast Corp. in 1997.
The sum would surpass all but three of Microsoft's recent purchases in terms of dollars. Microsoft is requesting antitrust approval for its $69 billion acquisition of video game developer Activision Blizzard Inc. The company also paid $26 billion to acquire LinkedIn in 2016. Nuance Communications Inc. is an AI business that specialises in speech recognition and associated software and services in the healthcare industry. Microsoft finalised its $20 billion acquisition of Nuance Communications Inc. last year.
The announcement of the investment comes less than a week after Microsoft announced it would be letting go of 10,000 employees due to the slowing demand for software. Microsoft stated in that announcement that it will continue to employ and invest in its top priorities. On Tuesday, the software developer releases financial results for the second quarter.
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