Microsoft invested $1 billion in OpenAI, the tiny San Francisco startup that created ChatGPT, in 2019. In the years since, it has quietly invested an additional $2 billion.
When a chatbot called ChatGPT appeared on the internet late last year, executives at several Silicon Valley firms were concerned that they were suddenly dealing with new artificial intelligence technology that could disrupt their businesses.
But it was cause for celebration at Microsoft. Satya Nadella, Microsoft’s CEO, had been laying the groundwork for this moment for several years.
Microsoft invested $1 billion in OpenAI, the tiny San Francisco startup that created ChatGPT, in 2019. According to two people familiar with the investment who requested anonymity because they were not authorised to speak with the media, it has quietly invested another $2 billion in the years since.
The $3 billion paid for the massive amounts of computing power required by OpenAI to build the chatbot. It also meant that Microsoft could quickly develop and launch new products based on the technology.
Microsoft is now poised to challenge Big Tech rivals such as Google, Amazon, and Apple with a technological advantage it has not had in more than two decades. Microsoft is looking to invest another $10 billion in OpenAI.
Microsoft invested $1 billion in OpenAI, the tiny San Francisco startup that created ChatGPT, in 2019. According to two people familiar with the investment who requested anonymity because they were not authorised to speak with the media, it has quietly invested another $2 billion in the years since.
The $3 billion paid for the massive amounts of computing power required by OpenAI to build the chatbot. It also meant that Microsoft could quickly develop and launch new products based on the technology.
According to a person familiar with the situation, Microsoft is in talks to invest another $10 billion in OpenAI in order to push its technology even further.
The potential $10 billion deal, which would primarily provide OpenAI with more computing power, has not been finalised, and the funding amount may change. However, the discussions show the tech titan’s determination to be on the cutting edge of what has become the hottest technology in the industry.
When he was running Microsoft’s Bing search engine more than a decade ago, Nadella worked with AI technologies, and for several years he has convened a biweekly internal meeting of AI leaders.
“The expectation from Satya is that we’re going to push the envelope in AI, and we’re going to do that across our products,” said Eric Boyd, the executive in charge of Microsoft’s AI platform team, in an interview.
Semafor first reported on Microsoft’s new talks with OpenAI. The Information and Fortune previously reported on its additional $2 billion investment in the company.
ChatGPT responds to questions, writes poetry, and riffs on almost any topic thrown at it. It is the most visible example of generative artificial intelligence, the term for a system that can generate text, images, sounds, and other media in response to short prompts. It is based on earlier technologies known as GPT-3 and GPT-3.5.
“It’s already been a home run, partly because Satya was foresighted enough to make the bet three years ago, and partly because all applications will be generative in the future,” said Matt McIlwain, managing partner at Seattle’s Madrona Venture Group.
The new generative AI technologies have the potential to completely transform everything from online search engines like Google to digital assistants like Alexa and Siri. Microsoft sees these technologies as a means of growing and diversifying.
The new generative AI technologies have the potential to completely transform everything from online search engines like Google to digital assistants like Alexa and Siri. Microsoft sees these technologies as a way to broaden and improve its already extensive portfolio of products for businesses, computer programmers, and consumers, while also increasing revenue across its Azure cloud computing services.
“It’s just fascinating to see how these generative models are capturing the imagination,” Nadella said last week to developers in India, adding, “I think it’s a golden age.”
According to McIlwain and four other people with knowledge of the effort, OpenAI is working on an even more powerful system called GPT-4, which could be released as soon as this quarter. Microsoft declined to comment on its product plans for the future.
The new chatbot, which was built using Microsoft’s massive network for computer data centres, could be a system similar to ChatGPT that only generates text. It could also juggle images and text. Some venture capitalists and Microsoft employees have already tried out the service. However, OpenAI has not yet decided whether the new system will include image-based capabilities.
OpenAI is led by Sam Altman, who rose to prominence in Silicon Valley as the founder of startup accelerator Y Combinator. Altman, 37, and his co-founders established OpenAI as a non-profit in 2015. However, he quickly restructured the venture as a for-profit corporation that could pursue funding more aggressively.
According to The Information, Microsoft began incorporating DALL-E image creations into its Bing search engine last year and is currently working with OpenAI on a new version of the search engine that will include ChatGPT-like technology.
Google, Meta, and other companies have been developing models similar to ChatGPT for years. AI systems hone their abilities by analysing massive amounts of digital text, such as books, Wikipedia articles, computer programmes, and chat logs.
“Building these systems really requires a supercomputer — and there aren’t many on the planet,” said Aiden Gomez, a former Google researcher who founded Cohere, a startup that has developed ChatGPT technology.
Altman told The New York Times in 2019 that the majority of Microsoft’s $1 billion investment was for the computing power OpenAI requires, and that Microsoft would eventually become the lab’s sole source of computing power.
Microsoft and OpenAI collaborated to create a new type of supercomputer designed specifically for ChatGPT and other generative AI technologies. As a result, Microsoft can easily provide these systems to its own customers.
Microsoft and OpenAI hope to improve these systems by training them on larger amounts of data, and most experts agree that their performance will improve. Microsoft admits that they can currently “hallucinate” answers by combining fact and fiction.
Speaking in India last week, Nadella presented data indicating that as much as 10% of all data could be AI-generated in just three years, potentially generating up to $7 billion in revenue for Azure, Microsoft’s cloud computing product, according to Gil Luria, an analyst at the investment bank D.A. Davidson.
These technologies still have a long list of flaws and unknowns. They frequently create harmful content, such as misinformation, hate speech, and images that are biassed against women and people of colour.
Because of the potential harm to their established brands, Microsoft, Google, Meta, and other companies have been hesitant to release many of these technologies. Microsoft quickly apologised five years ago after releasing Tay, a chatbot that generated racist, derogatory comments.
According to Mike Volpi, a partner at venture capital firm Index Ventures who was an early investor in generative AI, the Microsoft-OpenAI partnership is one of many contenders hoping to control where the technology is headed.
“One could argue that they all end up smelling the same,” he said. “Another argument is that what OpenAI is doing is truly unique, and that all of the money goes to them.”
