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 been making a lot of buzz in recent weeks.
In reality, for now it is still only a prototype chatbot based on artificial intelligence and machine learning 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 more than seven years ago in San Francisco, but it has only recently made headlines because of its huge and sudden success with ChatGPT. Its founders include Elon Musk and Sam Altman.
ChatGPT is a “large language model” that uses machine learning techniques, but optimized with supervised learning techniques.
It was developed to be used as a basis for creating other machine-learning models.
Its operation, user-side, is very simple: you log on to chat.openai.com/chat and ask a question. The automatic answers given by ChatGPT are mind-blowing, both because it writes fluently and because it actually seems to be able to answer a lot of questions, albeit not always perfectly.
It has been talked about a lot for a few weeks now, so much so that it is probably the first major technological phenomenon of 2023.
Microsoft and the announcement of the ChatGPT acquisition
Software such as that of ChatGPT appeals to many, especially to those tech giants that need to interact with a great many users.
It is therefore no coincidence that Microsoft was the first to take an interest. Actually, Microsoft has already long been part of OpenAI, in which Stripe, JPMorgan and other famous people such as LinkedIn co-founder Reid Hoffman, and PayPal co-founder Peter Thiel also participate.
Now, however, according to Semafor‘s disclosure, Microsoft would like to invest $10 billion to acquire 49% of OpenAI LP, now owned by the non-profit organization OpenAI Inc.
Should the deal go 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 financing would include other venture capital firms, and would value OpenAI at $29 billion. However, it is not yet known if the deal has been finalized, although it is possible that it could be finalized as early as the end of 2022.
Microsoft had previously invested $1 billion in OpenAI in 2019, and had long been in talks to increase its stake.
OpenAI
Note that the OpenAI company does not actually have a definite business model yet, so 10 billion invested on trust seems a bit much, even for a giant like Microsoft.
Indeed, right now ChatGPT is losing money because every time someone uses its 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 $10 billion investment.
But Microsoft is probably most interested in using OpenAI’s software to develop its technology on Microsoft Cloud, not least because according to some, artificial intelligence would be the most important massive 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, though, it does not seem possible to tell exactly how it will evolve
Microsoft’s stock
Perhaps it is no coincidence that 2023 did not open very well for Microsoft on the stock market.
During the session of 4 January, it opened with a -3%, which became -4.4% later in the day, and after it had already posted -1.5% on 3 January. On January 5 the decline continued with another -2%, although in the following days, it then recovered from this latest loss.
From its opening on 13 December to the present, the stock has accumulated a loss of 13%, which is more than double the -6% posted during the same period by the Nasdaq 100 index.
From the highs of November 2021 to the lows of 2022, also touched in November, Microsoft’s stock lost 38% of its value, then recovered 22% through 13 December. During the same period, the Nasdaq 100 index lost 36%, then recovered 13%, so in fact, until 13 December the trend of Microsoft’s stock was in line with that of the Nasdaq.
However, since rumors began to spread about the large investment in OpenAI, Microsoft’s stock market performance has definitely deteriorated.
However, for example, the Alphabet (formerly Google) stock has also lost 12% since 13 December, and Google is in fact Microsoft’s main competitor among the big tech companies engaged in artificial intelligence developments.
