Microsoft will invest billions in OpenAI in a quest to beat Amazon, Google

Microsoft (MSFT) is making a multi-year, multi-billion dollar investment in OpenAI, the company behind the much-discussed AI-based chatbot, ChatGPT. The move comes as Microsoft looks to add OpenAI capabilities to its own software offerings, giving it a potential competitive edge from Salesforce (CRM) to Google (GOOG, GOOGL).

“Our partnership with OpenAI is based on our shared ambition to responsibly advance cutting-edge AI research and democratize AI as the new technology platform,” Microsoft CEO Satya Nadella said in a statement.

“In the next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models and toolchain on Azure to build and run their applications.”

Microsoft invested $1 billion in OpenAI in 2019. However, the latest investment comes as the tech giant grapples with a round of layoffs that have hit businesses ranging from cloud services to gaming.

OpenAI has gained a lot of attention in recent years with AI-based applications including the DALL-E image platform and more recently the ChatGPT chatbot. Interest in ChatGPT exploded in November when it became available to the general public.

In a statement, OpenAI said Microsoft’s investment will allow it to develop and research artificial intelligence that is increasingly “secure, useful and efficient.”

Microsoft Corp. CEO Satya Nadella speaks Wednesday, December 2, 2015, at Microsoft’s annual shareholder meeting in Bellevue, Washington (AP Photo/Ted S. Warren)

“We have worked together to build multiple Azure-powered supercomputing systems that we use to train all of our models,” the company said in a statement.

“Azure’s unique architecture design was critical in delivering best-in-class performance and scale for our AI training and inference workloads. Microsoft will increase its investment in these systems to accelerate our independent research, and Azure will remain the exclusive cloud provider for all OpenAI workloads across our research, APIs and products.”

Microsoft’s announcement, however, comes at a dangerous time. On January 18, the company said it would cut 10,000 employees by the end of its fiscal third quarter. The move will also net the company $1.2 billion.

However, OpenAI’s capabilities have been touted as a potential win for Microsoft as it looks to leverage the power of its cloud business. Bringing OpenAI’s AI capabilities to these platforms could give Microsoft a strong edge over rivals such as market leader Amazon and number three Alphabet in the cloud industry.

ChatGPT is also said to be a game-changer for Microsoft’s Bing, giving the company what could be a major advantage over Google’s Alphabet search engine, providing users with easy-to-understand and conversational answers to their queries.

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