Microsoft was one of the early investors in OpenAI, laying the foundation for the growth and explosion of ChatGPT, which in turn led to the AI ​​craze that continues to this day.

OpenAI quickly became the world's most influential and valuable AI startup.

Meanwhile, the Windows giant has also risen to become the world leader in AI based on these early investments. In total, Microsoft has invested more than $13 billion in the famous AI startup.

The company also uses ChatGPT as the basis for its Copilot family of tools. Microsoft earns billions of dollars in revenue from its partial ownership of OpenAI.

During development, the two companies lobbied Congress together, strategized together, and seemed to agree on almost everything.

When OpenAI ousted Sam Altman as CEO last year, Microsoft CEO Satya Nadella worked behind the scenes to bring the founder back into the fold.

The two companies are so close that Altman calls their relationship "the best brotherhood in tech."

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Is Microsoft's confrontation with OpenAI inevitable? Photo: FT

“One forest cannot have two tigers”

In March, it was reported that Altman and OpenAI CEO Brad Lightcap were publicly trying to lure businesses away from Microsoft's Copilot and toward OpenAI's Enterprise ChatGPT.

Specifically, Altman and Lightcap “courted” more than 300 company executives in New York, San Francisco, and London, undercutting Microsoft by saying that businesses could work directly with those who built genAI technology instead of getting old technology from Microsoft.

Meanwhile, Nadella once said, “If OpenAI disappeared tomorrow… we have all the intellectual property and all the capabilities. We have the people, we have the computers, we have the data, we have everything.”

Microsoft's $14 billion investment in OpenAI includes cash as well as computing resources, specifically the computer power needed to train and run the technology.

The most recent cash injection came in early October, when OpenAI raised $6.6 billion from investors including banks, hedge funds, Microsoft and AI chipmaker Nvidia.

Microsoft is said to have invested $1 billion of that, and after the round, OpenAI is estimated to be worth $157 billion.

But that's not enough for the company that owns ChatGPT. The company is burning through cash at a terrifying rate—$5 billion a year—and it's not going to stop anytime soon.

The New York Times reports that by 2029, the company will spend $37.5 billion annually on computing costs, which doesn't include salaries, rent and all other corporate expenses.

So OpenAI wants Microsoft to give it even more computing power. And Microsoft is dragging its feet. The Times notes: “OpenAI employees complain that Microsoft isn’t providing enough computing power. And if another company beats them to creating AI that matches the human brain, Microsoft will be held responsible because it hasn’t given OpenAI the computing power it needs.”

OpenAI is now looking elsewhere for those resources, signing a deal with Oracle worth nearly $10 billion.

Additionally, Microsoft and OpenAI recently renegotiated the value of Microsoft's computing power, though it's unclear whether the new deal will reduce or increase the financial value.

Because of these issues, Microsoft has hedged its bets against relying too heavily on OpenAI for its future AI roadmap.

Notably, the company paid more than $650 million to hire nearly all of the staff from OpenAI competitor Inflection.

The software giant also hired former Inflection CEO and co-founder Mustafa Suleyman to head up Microsoft's AI efforts.

Suleyman and OpenAI have had several clashes, with Altman growing increasingly upset over Suleyman's hiring.

“Microsoft could be left behind if it only uses OpenAI technologies,” Gil Luria, an analyst at investment bank DA Davidson, told the Times. “This is a real race, and OpenAI may not win.”

(According to NYT, CW)

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