Microsoft invests billions in ChatGPT-maker OpenAI

Sam Altman, left, one of the founders of OpenAI, and Satya Nadella, Microsoft’s chief executive, at the Microsoft Campus in Redmond, Wash. on July 15, 2019. As the new chatbot wows the world with its conversational talents, the tech giant is poised to reap the benefits. Photo / New York Times

Microsoft says it is making a “multiyear, multibillion dollar investment” in the artificial intelligence startup OpenAI, maker of ChatGPT, DALL-E and other tools that can write readable text and generate new images.

The tech giant on Monday described its new agreement as the third stage of a growing partnership with San Francisco-based OpenAI that began with a US$1 billion investment in 2019. It didn’t disclose the dollar amount for its latest investment.

The New York Times earlier reported that Microsoft quietly tipped in another US$2b after its 2019 investment and was weighing putting another US$10b in at a US$29b valuation.

The partnership positions Microsoft to sharpen its competition with Google in commercializing new AI breakthroughs that could transform numerous professions, as well as the internet search business. Microsoft is expected to add ChatGPT functionality to its Bing search engine and other products.

OpenAI’s free writing tool ChatGPT launched on Nov. 30 and has brought public attention to the possibilities of new advances in AI.

It’s part of a new generation of machine-learning systems that can converse, generate readable text on demand and produce novel images and video based on what they’ve learned from a vast database of digital books, online writings and other media.

Microsoft’s partnership enables it to capitalize on OpenAI’s technology. Microsoft’s supercomputers are helping to power the startup’s energy-hungry AI systems, while the Redmond, Washington-based tech giant will be able to further integrate OpenAI technology into Microsoft products.

“In this next phase of our partnership,” said a statement from Microsoft CEO Satya Nadella, customers who use Microsoft’s Azure cloud computing platform will have access to new AI tools to build and run their applications.

OpenAI started out as a nonprofit artificial intelligence research company when it launched in December 2015. With Tesla CEO Elon Musk as its co-chair and among its early investors, the organization’s stated aims were to “advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.”

That changed in 2018 when it incorporated a for-profit business Open AI LP, and shifted nearly all its staff into the business, not long after releasing its first generation of the GPT model for generating human-like paragraphs of readable text. Musk also left its board in 2018.

OpenAI’s other products include the image-generator DALL-E, first released in 2021, the computer programming assistant Codex and the speech recognition tool Whisper.

Microsoft said Monday its strengthened partnership can help “to accelerate AI breakthroughs to ensure these benefits are broadly shared with the world.”

The investment announcement came a day before Microsoft was scheduled to report its earnings from the October-December financial quarter and after disclosing last week its plans to lay off 10,000 employees, close to 5% of its global workforce.

While Microsoft’s reported US$10b-plus investment in ChatGPT is large, it pales next some of the tech giant’s other deals, including its US$68.7b deal to buy game maker Activision last year, its US$26b takeover of LinkedIn in 2016 and its US$19.7 acquisition of AI text-to-speech maker Nuance in 2021.

Microsoft shares were up 1.56 per cent to US$243.97 in late trading for a $1.8 trillion market cap.

With reporting by Herald staff.