OpenAI, an artificial intelligence startup developing chatbot ChatGPT, has recently become a big hit with investors, and Microsoft is preparing to invest an additional $10 billion (currently about 67.1 billion RMB) in OpenAI. But the problem is that it’s not clear what products can be developed from this technology, or whether it will be profitable.
When people ask chatbot ChatGPT how much the OpenAI company behind it is worth, the recent hit bot says, “It’s probably worth hundreds of millions of dollars.”
There are reports that Microsoft is considering investing another $10 billion in OpenAI on top of its previous $1 billion investment. While ChatGPT and other AI models developed by OpenAI are not yet profitable, Microsoft’s bet on OpenAI is worth much more than ChatGPT suggests. openAI has developed a number of impressive demo models, and has also enabled the Microsoft GitHub platform to provide programmers with a popular automatic code completion feature for programming. Despite all the industry hype around OpenAI’s generative AI technology, the fact is that the startup hasn’t created many breakthrough, high-profit products or businesses.
“We really don’t know what ChatGPT is good at doing,” says James Cham, a partner at investment firm Bloomberg Beta. The path to profitability for ChatGPT may be uncertain at this point, but Cham, like many venture capitalists and entrepreneurs, believes the technology behind the AI bots will pay off big time. Today, there is a surge of interest in generative AI that can automatically generate things like text, images and other data, and OpenAI’s technology has been a natural fit for the space.
Chaim likens the current situation to the early stages of the Internet, when vague but sobering demonstrations heralded a sea change in the way software, technology companies and broader society operated. Chum said of ChatGPT: “We’ve had great demos on AI for decades, but this is the first time it’s been made public, and they’re very excited about the possibilities of AI.”
OpenAI took the Internet by storm when it released its chatbot in December 2022. chatGPT demonstrated an uncanny ability to answer questions; in addition to being able to write articulate articles, write runnable computer code, and think about the meaning of life. chatGPT is based on OpenAI’s development of A text generation algorithm, GPT-3, ChatGPT is able to take large amounts of text from the Web and other sources and then train more on how to answer questions.
One reason the tech industry is so excited about ChatGPT is that it could break the long-standing dominance of Google and other tech giants in the search space, allowing smaller companies to beat out much larger competitors. One popular argument is that bots could change Web search.
For Microsoft, increasing its investment in OpenAI could ensure that once AI starts to disrupt the status quo, Microsoft is not only unscathed, but could benefit from it. Despite all the hype around generative AI, Microsoft is well positioned to use the technology to improve the company’s offerings, said Nathan Benaich, an investor at investment firm Air Street Capital who tracks trends in the artificial intelligence industry.
Microsoft has a number of products in enterprise, cloud services and consumer devices and software that offer potential opportunities to leverage generative AI. Microsoft already uses ChatGPT technology in its Visual Studio products to automatically generate code snippets, and is reportedly considering using ChatGPT to improve the performance of its search engine, Bing.
Benacci said, “The application space that Microsoft offers to all of its customers is so vast.” For a company like Microsoft, which is worth about $1.7 trillion, $10 billion is not a lot of money when you consider the potential return, he said. Some reports say the investment would value OpenAI at $29 billion.
David Yoffie, a professor at Harvard Business School who studies the strategy of large technology platforms, said Microsoft may also see OpenAI as a means to catch up with other companies. He said Microsoft has been lagging behind Google and other companies in cutting-edge research on artificial intelligence. “More work needs to be done, which is why the investment is needed,” Yoffie said, “and their investment could accelerate OpenAI commercialization.”
In 2019, Microsoft invested $1 billion in OpenAI. The deal bundles OpenAI with Microsoft’s cloud computing platform. Developing AI tools like ChatGPT requires a lot of computing power and training data, so supporting OpenAI aligns with Microsoft’s goal to capture a larger share of the cloud computing market. the cutting-edge needs of OpenAI could help Microsoft develop more robust cloud computing technologies to differentiate itself from the cloud computing industry. in 2021, Amazon has 40 percent of the cloud services market, and Microsoft’s market share of 15 percent, and Google, widely seen as the industry leader in artificial intelligence, with only 6 percent.
Amber Yang, an investor who focuses on AI companies, said OpenAI is freer to test generative AI than many large tech companies, which tend to worry about negative consequences if their AI models don’t perform well. “They act, behave and think more like a startup, whereas Google is more constrained by the pursuit of perfection,” she said. Young believes Microsoft could benefit from this. A close relationship with OpenAI allows Microsoft to effectively leverage the fruits of its adventures in artificial intelligence on a distance-appropriate basis.
The exact terms of the $10 billion Microsoft wants to invest in OpenAI are unclear, but reports suggest that Microsoft will receive 75 percent of OpenAI’s profits before recouping its investment. Microsoft would then retain 49 percent of OpenAI’s shares, with other investors holding another 49 percent and the nonprofit organization of which OpenAI is a part holding a 2 percent stake. Earlier reports indicate that several investment firms are also eyeing a stake in OpenAI.
It’s probably no coincidence that OpenAI is raising money at a time when the industry is making a lot of noise around generative AI and ChatGPT is in the spotlight. Until then, many people have not tried to develop products using this technology.
“OpenAI has done a great job of marketing and making demo software,” says Mike Volpi, an investor in the startup Cohere. ai, which competes with OpenAI in language modeling. In contrast to some other investors, Volpi is skeptical about the development of generative artificial intelligence and says the technology’s commercial potential remains to be determined. One question that is debatable, according to Volpi, is how unique the models developed by OpenAI or other companies really are, and another is whether the industry can solve the problem of getting the models to behave consistently. Volpi said, “You have to establish a delicate balance between what it can do now and what people want it to do.”
Some seasoned tech entrepreneurs are also cautious. phil Libin, who was CEO of the popular note-taking app Evernote from 2007 to 2015, says he’s a big fan of artificial intelligence but is wary of the current craze. “There’s a lot of work that needs to be done to get these AI models to really deliver on the promise that people think they’re going to deliver,” he said.
Libin also sees a number of tricky technical challenges ahead for these AI. One of them is that ChatGPT and other generative AI models currently crawl human-generated content from the Web and the generated text and images are put back online. “All of these models are going to mess up their own training data,” he says. “We’re about to be inundated with a tsunami of information about nonsense.”
