According to some recent rumors, Microsoft is reportedly in talks to invest $10 billion in ChatGPT.
Microsoft’s interest in ChatGPT
ChatGPT (Chat Generative Pre-trained Transformer) is an artificial intelligence-based software that has generated a lot of buzz in recent weeks.
Actually, for now it is still just a prototype AI and machine learning based chatbot that specializes in direct conversation with human users, but thousands of people are already using it.
It was developed by OpenAI, a non-profit organization that researches artificial intelligence to create user-friendly interfaces for people.
OpenAI was founded over seven years ago in San Francisco, but has recently made headlines due to its huge, sudden success with its ChatGPT artificial intelligence chat. Among its founders are Elon Musk and Sam Altmann.
ChatGPT is a “big language model” using machine learning techniques, but optimized with supervised learning techniques.
It was developed to be used as a base to create other machine learning models.
Its operation, on the user side, is very simple: log in to chat.openai.com/chat and ask a question. The auto-responders that ChatGPT gives are amazing, both because he writes fluently and because he seems to be able to answer a lot of questions, although not always perfectly.
Much has been said about it in recent weeks, so much so that it is probably the first great technological phenomenon of 2023.
Microsoft and the announcement of the acquisition of ChatGPT
Software like ChatGPT appeals to many, especially tech giants who need to interact with a large number of users.
So it’s no coincidence that Microsoft was the first to take an interest. In fact, Microsoft has long been a part of OpenAI, which also includes Stripe, JPMorgan and other famous people such as LinkedIn co-founder, reid hoffmanand the co-founder of PayPal, Peter Thiel.
Now, however, according to the disclosure of traffic lightMicrosoft would like to invest $10 billion to acquire 49% of OpenAI LP, now owned by the non-profit organization OpenAI Inc.
If the deal goes through, 2% of the company would remain in the hands of OpenAI Inc, while the remaining 49% would be owned by other investors.
In fact, the funding would include other venture capital firms and would value OpenAI at $29 billion. However, it is not yet known if the deal has closed, although it is possible that it could close by the end of 2022.
Microsoft had previously invested $1 billion in OpenAI in 2019 and had long been in talks to increase its share.
Keep in mind that the OpenAI company does not yet have a defined business model, so 10 billion invested in trust seems too much, even for a giant like Microsoft.
In fact, right now ChatGPT is losing money because every time someone uses their chatbot, the company has to incur costs without getting any revenue in return.
The agreement would stipulate that when OpenAI generates profits, 75% will go to Microsoft until it recoups its initial investment of $10 billion.
But Microsoft is probably more interested in using OpenAI’s software to build its technology on the Microsoft Cloud, especially since artificial intelligence is considered by some to be the most important mass technology of the next decade.
However, it is important not to forget that OpenAI also has competitors, so the scenario between now and the next few years could also change. At this time, however, it doesn’t seem possible to say exactly how it will evolve.
It may not be a coincidence that 2023 did not open very well for Microsoft on the stock market.
During the January 4 session, it opened at -3%, which became -4.4% later in the day, and after it had already registered -1.5% on January 3. On January 5, the fall continued with another -2%, although in the following days it recovered from this latest loss.
From its opening on December 13 to the present, the stock has accumulated a loss of 13%, more than double the -6% registered in the same period by the Nasdaq 100 index.
From the November 2021 highs to the 2022 lows, also touched in November, Microsoft shares lost 38% of their value, then recovered 22% through December 13. Over the same period, the Nasdaq 100 Index lost 36%, then rebounded 13%, so in fact, through December 13, Microsoft’s stock trended in line with that of the Nasdaq.
However, since the rumors about the large investment in OpenAI began to spread, Microsoft’s stock performance definitely deteriorated.
However, for example, Alphabet (formerly Google) shares have also lost 12% since December 13 and, in fact, Google is Microsoft’s main competitor among the big technology companies dedicated to artificial intelligence developments.