Microsoft is reportedly considering investing $10 billion in San Francisco artificial intelligence (AI) research firm OpenAI. Analysts say the potential deal has the potential to be the defining deal of a new era of AI.
If Microsoft’s bets on the far-reaching impact of AI technology are correct, the deal could also spark a reorganization of the AI world as other tech companies race to claim their place in the new field of “generative AI.
Last month, OpenAI came into the global spotlight with the launch of ChatGPT, an intelligent chatbot system that answers questions and generates text in natural-sounding language.
ChatGPT quickly gained the attention of Microsoft. Microsoft executives believe that the technology behind the service will soon have a deeper impact on the entire technology world.
According to Eric Boyd, head of Microsoft’s artificial intelligence platform, “These AI models will change the way people interact with computers. Talking to a computer, as naturally as talking to a person, will revolutionize the everyday experience of using technology. It can understand your intent in ways never before possible, and then output it in a way that computers can operate.”
Last week it was reported that Microsoft plans to invest $10 billion in OpenAI to take a significant minority stake in it (about 49%). When the investment is complete, OpenAI will be valued at $29 billion.
Microsoft declined to comment on this.
Already using OpenAI technology
This potential milestone investment by Microsoft comes at a time when investment booms like blockchain and digital cryptocurrencies have subsided and venture capitalists are scrambling to back the latest artificial intelligence technologies.
Back in 2019, Microsoft already made its first $1 billion investment in OpenAI. Since then, Microsoft has also used OpenAI’s technology in a number of its own products, including the text generation system GPT-3, the image generation system Dall-E 2 and the programming assistance system.
The speed at which these AI tools, from advanced research projects to everyday products, may be unprecedented in the history of technology, artificial intelligence experts say. Codex, for example, was only mentioned in a research paper for OpenAI in mid-2021, but less than a year later, Microsoft turned it into a commercial subscription service.
Thomas Dohmke, CEO of GitHub, Microsoft’s code hosting platform, says developers using the Copilot service (GitHub’s AI-turned-tool) have 40% of their code created automatically by the AI system, cutting the time it takes to create new code in half. Clearly, this is a huge leap in efficiency.
“Zero-sample learning” is possible
Much of OpenAI’s technology stems from the creation of so-called “large language models” that have been trained on large amounts of text. Unlike the early forms of machine learning that dominated AI over the past decade, this technology has created systems that can be used in a much wider range of environments, increasing their commercial value.
The real power of these models is that they can perform a large number of different tasks simultaneously,” said Boyd, head of Microsoft’s artificial intelligence platform. This makes it possible to do what’s called ‘zero-sample learning,’ where the AI is used directly in new tasks without having to train them.
Google and other tech giants, as well as some startups, have also invested significant resources in creating such large AI models. But since 2020 (when GPT3 stunned the AI world with its ability to generate large chunks of text on demand), OpenAI has led the way in that market with a series of compelling public demonstrations.
Using AI more broadly
Today, Microsoft executives are looking to use AI technology in a broader range of products. Late last year, Microsoft CEO Satya Nadella predicted that “generative AI” would lead us to a world where everything a person does, regardless of their profession, is supported by technology.
Oren Etzioni, a consultant and board member of A12, the artificial intelligence research organization founded by Microsoft co-founder Paul Allen, said “generative AI” will be a core part of productivity applications such as Microsoft Office. In the future, these applications will be able to show users relevant information, check their work, and provide automatic content generation services.
Clearly, Microsoft’s rivals are not ignoring the potential for dramatic changes in the software market, seeing the technology as a rare opportunity to break into a market dominated by large technology companies.
Stability AI is building a “PowerPoint killer,” according to Emad Mostaque, director of London-based artificial intelligence research firm Stability AI. Its product is based on artificial intelligence technology and is designed to make it easier to create presentations than the widely used Microsoft PowerPoint.
This is both defensive and offensive for Microsoft. First, Microsoft wants to protect the position of older products such as Office, but also to consolidate its position in markets such as Internet search. But at the same time, with this potential investment, Microsoft is also trying to use its technological and financial strength to position itself as “the main platform for building the next era of artificial intelligence.
A handful of giants have a say
One of OpenAI’s investors said OpenAI needs more cloud computing power than a startup or venture capital investor can muster. That means OpenAI has no choice but to seek financial support from a handful of tech giants.
But if a handful of tech giants become investors or core platforms for “startups building the next generation of artificial intelligence technology,” that could raise concerns among regulators.
A person familiar with the matter said Microsoft’s alliance with OpenAI could be closely watched by regulators, but the person also noted that the current potential minority investment should not trigger any regulatory intervention.
But as owners of major cloud computing platforms need to support the coming era of “generative artificial intelligence,” it seems inevitable that large tech companies will have a say in the future of that market.
