Microsoft plans to invest a massive $10 billion in OpenAI, the parent of the smart AI tool ChatGPT. The tool has been the talk of the tech world for several weeks since its launch in late November 2022. As part of a capital round with other investors included, the investment deal would value OpenAI at an astounding $29 billion.
Although it’s unclear if the agreement has been finalized, term sheets offered to potential investors stated the intention was to consummate the purchase by the end of 2022, according to Semafor. Up until it recovers its investment, Microsoft will allegedly get 75% of OpenAI’s income; at that point, the corporation would take a 49% ownership position in the company.
ChatGPT is a smart artificial intelligence (AI) tool with a natural language processing model, which implies that it is designed to generate text that appears as if written by a human. The AI model, itself a variant of the GPT-3 family of large language models, has been used for everything from developing code to writing college essays.
Microsoft’s online search efforts might be strengthened with an investment on ChatGPT, a sector where Google now reigns supreme. Although the business’s Bing browser only has a small part of the worldwide search engine market, it is believed that the transaction would enable the company to challenge Google’s hegemony by providing more sophisticated search features.
An analysis from Morgan Stanley in December looked into whether ChatGPT posed a danger to Google. Language models may displace Google’s status as the primary gateway to the internet, according to Brian Nowak, the bank’s chief Alphabet analyst.
OpenAI, co-founded by Elon Musk and Silicon Valley investor Sam Altman, released its product ChatGPT to the public in late November. Despite excitement over its potential, the initiative is swallowing money due to the extreme pressure of demand placed on its servers as a result of its virality. Altman said that ChatGPT had surpassed 1 million users five days after OpenAI first made it available.
Earlier this week, The Wall Street Journal reported that ChatGPT was enabling its staff and early investors to sell their shares for a $29 billion valuation. Microsoft, which had given OpenAI a $1 billion cash and cloud credit investment in 2019 according to a story in The Information, was reportedly in discussions to boost its share. $10 billion is a significant price tag for Microsoft’s stockholders, whereas $29 billion is a tremendous sum for OpenAI, a company that hasn’t yet determined its business model.
