September 8, 2023
Economy International

Microsoft and OpenAI: $10 Billion Investment Deal

Microsoft and OpenAI: $10 Billion Investment Deal

Microsoft is reportedly in talks to invest $10 billion in OpenAI, the company that owns the chatbot program known as ChatGPT. The investment would value OpenAI at $29 billion, according to an article by Semafor. This news highlights the growing interest in the AI company, whose chatbot has impressed both amateurs and industry experts with its ability to compose haikus, debug code, and answer questions while imitating human speech.

The funding round could also include other venture firms and documents sent to potential investors indicate that the round would target to close by the end of 2022. This would make Microsoft a major investor in OpenAI, as it had already invested $1 billion in 2019 and its cloud services division provides the computing power needed by the AI firm.

Last year, Microsoft had announced plans to integrate image-generation software from OpenAI into its search engine Bing. According to the report by Semafor, similar plans are underway for ChatGPT as Microsoft looks to compete with market leader Google Search. Additionally, Microsoft will get 75% of OpenAI’s profits until it recoups its initial investment and after hitting that threshold, Microsoft would have a 49% stake in OpenAI, with other investors taking another 49% and OpenAI’s nonprofit parent getting 2%.

OpenAI, which charges developers licensing its technology about a penny or a little more to generate 20,000 words of text, and about 2 cents to create an image from a written prompt, expects $200 million in revenue next year and $1 billion by 2024, according to a recent pitch to investors. It spends about a few cents in computing power every time someone uses its chatbot, which has raised concerns about OpenAI’s cash burn, recently Sam Altman, OpenAI CEO tweets.

Neither Microsoft nor OpenAI have commented on the report, but if the investment goes through, it would be a major endorsement for the artificial intelligence company.

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