Microsoft said Monday it is making a “multi-million dollar, multi-year” investment in OpenAI, the San Francisco artificial intelligence lab behind the experimental ChatGPT online chatbot.
The companies did not disclose specific financial terms of the deal, but a person familiar with the matter said Microsoft will invest $10 billion in OpenAI.
Microsoft had already invested more than $3 billion in OpenAI, and the new deal is a clear indication of the importance of OpenAI’s technology to Microsoft’s future and its competition with other big tech companies like Google, Meta, and Apple.
With the deep pockets of Microsoft and the cutting-edge artificial intelligence of OpenAI, companies hope to remain at the forefront of generative artificial intelligence, technologies that can generate text, images, and other media in response to brief prompts. After its surprise launch in late November, ChatGPT, a chatbot that answers questions in clear, well-punctuated prose, became the symbol of a new and more powerful wave of artificial intelligence.
The fruit of more than a decade of research inside companies like OpenAI, Google, and Meta, these technologies are poised to remake everything from online search engines like Google Search and Microsoft Bing to photo and graphics editors like Photoshop.
The settlement follows Microsoft’s announcement last week that it had begun laying off employees in part of an effort to cut 10,000 jobs. The changes, including severance, lease terminations and what he called “changes to our hardware portfolio,” would cost $1.2 billion, he said.
Satya Nadella, the company’s chief executive, said last week that the cuts would allow the company to refocus on priorities like artificial intelligence, which he called “the next great wave of computing.”
The rise of OpenAI
The San Francisco company is one of the most ambitious artificial intelligence laboratories in the world. Here’s a look at some recent developments.
Mr. Nadella made it clear in his company’s announcement Monday that the next phase of the partnership with OpenAI will focus on bringing tools to market, saying that “developers and organizations across all industries will have access to the best infrastructure , models and AI toolchain. ”
OpenAI was created in 2015 by a small group of AI researchers and entrepreneurs, including Sam Altman, head of startup builder Y Combinator; Elon Musk, the billionaire CEO of electric car maker Tesla; and Ilya Sutskever, one of the most important researchers of the last decade.
They founded the lab as a non-profit organization. But after Musk left the company in 2018, Altman turned OpenAI into a for-profit company so he could raise the money needed for research on him.
A year later, Microsoft invested a billion dollars in the company; over the next few years, he quietly invested another $2 billion. These funds paid for the enormous amounts of computing power required to build the kind of generative AI technologies for which OpenAI is known.
OpenAI is also in talks to complete a deal in which it would sell existing shares in a so-called takeover bid. This could total $300 million, depending on how many employees agree to sell their shares, according to two people with knowledge of the discussions, and would value the company at about $29 billion.
In 2020, OpenAI created a landmark AI system called GPT-3 that could generate text on its own, including tweets, blog posts, news articles, and even computer code. Last year he introduced DALL-E, which allows anyone to generate photorealistic images simply by describing what they want to see.
Based on the same technology as GPT-3, ChatGPT showed the general public just how powerful this type of technology could be. More than a million people tried out the chatbot during its first days online, using it to answer trivia questions, explain ideas, and generate everything from poetry to term papers.
Microsoft has already incorporated GPT-3, DALL-E, and other OpenAI technologies into its products. In particular, GitHub, a popular Microsoft-owned online service for developers, offers a tool called Copilot that can automatically generate snippets of computer code.
Last week, he expanded the availability of various OpenAI services to customers of Microsoft’s Azure cloud computing offering, saying ChatGPT would be “coming soon.”
The company said it planned to report its latest quarterly results on Tuesday, and investors expect tough economic conditions, including declining sales of personal computers and more cautious business spending, to further weigh on revenue.
Microsoft has faced slowing growth since late summer, and Wall Street analysts expect new financial results to show its slowest growth since 2016. But the business is still producing substantial profits and cash. has continued return money to investors via quarterly dividends and a $60 billion share buyback program authorized by its board in 2021.
Both Microsoft and OpenAI say their goals are even higher than a better chatbot or programming assistant.
OpenAI’s stated mission was to build artificial general intelligence, or AGI, a machine that can do anything the human brain can. When OpenAI announced its initial deal with Microsoft in 2019, Mr. Nadella described it as the kind of lofty goal a company like Microsoft should be pursuing, likening AGI to the company’s efforts to build a quantum computer, a machine that would be exponentially faster than today’s machines.
“Whether it’s our pursuit of quantum computing or AGI, I think these highly ambitious North Stars are needed,” he said.
That’s not something researchers necessarily know how to build. But many believe that systems like ChatGPT are a path to this lofty goal.
In the short term, these technologies are a way for Microsoft to expand its business, increase revenue, and compete with companies like Google and Meta, which are also tackling AI advances with a sense of urgency.
Sunda Pichai, the CEO of Google’s parent company Alphabet, recently declared a “code red,” upsetting plans and spurring AI development. Google intends to introduce more than 20 products and demonstrate a chatbot-enabled version of its search engine this year, according to a slideshow reviewed by The New York Times and two people with knowledge of the plans who were not authorized to discuss them.
But new AI technologies come with a long list of flaws. They often produce toxic content, including misinformation, hate speech, and images that are biased against women and people of color.
Microsoft, Google, Meta, and other companies have been reluctant to release many of these technologies because it could damage their established brands. Five years ago, Microsoft launched a chatbot called Tay that spewed racist and xenophobic language and promptly removed it from the internet after user complaints.
Nico Grant contributed reporting.
