Listen to the podcast:
People familiar with the situation say that Microsoft has talked about investing $10 billion in the company that owns ChatGPT. ChatGPT is a hugely popular app that has been raving about casual users and AI experts alike since its latest software came out last month.
Read more: What is Chatgpt?
People are saying that OpenAI, the company behind ChatGPT, would be worth $29 billion with the new investment and funding, which would also come from other venture capital firms. It’s unclear if the deal is done, but documents sent to potential investors in recent weeks explaining the terms said the deal should close by the end of 2022 at the latest.
People say that Microsoft’s investment would be part of a complicated deal in which the company would get 75% of the OpenAI profits until it gets its money back. (It’s not clear if the money OpenAI spends on Microsoft’s cloud computing business would help balance its books.)
After that point, I would go back to a structure that shows who owns OpenAI, with Microsoft getting 49%, other investors getting the other 49%, and OpenAI’s nonprofit parent getting 2%. There is also a limit on how much each group of investors can earn, which is unusual for venture deals where investors expect to get back 20 or 30 times their money. Things could change with the terms and amount of investment, and the deal could fall through.
Also Read: Is Windows 11 Free?
Microsoft and OpenAI said they had nothing to say. Last week, the Wall Street Journal said that ChatGPT was allowing its employees and early investors to sell its shares at a price of $29 billion. The Information reported in October that Microsoft, which had put $1 billion in cash and cloud credits into OpenAI in 2019, was in talks to increase its stake.
OpenAI is worth $29 billion, which is a lot for a company that has yet to figure out its business model. Microsoft shareholders will have to pay $10 billion, which is also a lot of money.
But Microsoft’s investment is not a big risk. Sam Altman, the CEO of OpenAI, says that every time someone talks to the ChatGPT chatbot, it costs the company pennies in computing power. But it will spend most of it on Microsoft’s cloud business, which is working hard to catch up with Amazon Web Services, its biggest competitor.
If OpenAI figures out how to make money from products like ChatGPT and the imaging tool called Dall-E, Microsoft will get 75% of the profits until it recoups what it invested in the company in the first place.
Also read: GPT-4 Everything you need to know
Microsoft takes financial risks and gains, but the biggest prize is getting to work with OpenAI to build the technology on the Microsoft Cloud. This puts Microsoft at the forefront of what could be the most important consumer technology of the next ten years.
That’s a big win for Microsoft, especially since OpenAI’s main competitor, Google, helped develop some of the technology it uses. The Information said that Microsoft was also in talks to add some of these features to its other programs, such as Word and Outlook email.
Microsoft’s $10 billion investment is a bet that OpenAI will stay well ahead of other companies using the AI algorithms that make ChatGPT work. But companies like Stability AI are likely to give OpenAI a lot of trouble.
It’s still unclear how this new crop of AI companies will find “moats” and “network effects” that keep competitors out. It’s hard to make money in consumer tech without it.
The view from ChatGPT
We asked ChatGPT to write a story from a Wall Street analyst’s point of view about Microsoft’s $10 billion investment in OpenAI.
It was a normal morning on Wall Street during the week. Traders and analysts were busy checking their screens and gathering in conference rooms. Suddenly, news broke that Microsoft was investing $10 billion in OpenAI, the top lab for AI research.
To know more: Neeva AI search engine
I was immediately interested because he was a senior analyst at a large investment firm. He had been looking at OpenAI for years and knew that they were at the forefront of AI research. His work on natural language processing, machine learning and robotics could have changed everything from healthcare to transportation.
But even for Microsoft, $10 billion was a huge amount. Why did they put so much money into it?
I researched the deal quickly and learned more about the details. Microsoft and OpenAI had been working together for a while, sharing resources and working together on different projects. This investment basically made the partnership official, so the two companies could work together and speed up their research.
But it wasn’t as simple as that. As I learned more about the news, I realized that this investment was not just about research. It was about where to stand.
Like many other tech giants, Microsoft was very focused on the future of AI. They knew that in the next few years, the companies that owned the technology would have a huge advantage. By putting money into OpenAI, they are putting themselves at the forefront of this change.
When I told my coworkers and clients about my analysis, I could feel how excited they were. This was a game-changing move that would have effects throughout the tech industry and beyond.
The partnership between Microsoft and OpenAI produced amazing results in the weeks and months that followed. Their work together led to advances in natural language processing and machine learning, creating new technologies that were quickly used by companies around the world.
As a Wall Street analyst, I felt good when my predictions turned out to be correct. And as AI continued to change the world, I knew this was just the beginning. Microsoft and OpenAI were showing the way to a bright future.
Subscribe to our latest newsletter
To read our exclusive content, sign up now. $5/month, $50/year