News & Analysis

Microsoft Extends OpenAI Partnership

What was being rumored has been confirmed now as the Big-tech IT company is pumping in billions of dollars to own a chunk of the OpenAI pie

Two things happened in the New Year. The first was Microsoft joining several other tech giants to announce big ticket layoffs as the recessionary headwinds came calling. The second was around how OpenAI required money to fund its experiments and server costs, amidst rumors that the software major was pumping in $10 billion for a large chunk of the AI pie. 

Reports now suggest that Microsoft has formally extended its partnership with OpenAI with a multi-year, multi-billion dollar investment. What’s more, this information comes at a time when the company’s CEO Satya Nadella announced that the axed 10,000 jobs in the company were not needed to meet its long-term goals in the light its continued AI advancements. 

That Microsoft set aside a whopping $1.2 billion package towards the severance costs, hardware portfolio changes and lease consolidation costs indicates which way the cookie is crumbling. Truth be told, Microsoft hasn’t really been covert about its intentions. Nadella had told Wall Street Journal that his company planned to offer OpenAI’s foundational systems as commercial platforms so that any entity in the industry could build on them. 


A three-way engagement is what’s on the anvil

In a blog post, Microsoft said it would enhance investments in the deployment of specialized supercomputing systems to accelerate OpenAI’s research and integrate its artificial intelligence with its own products. The blog also noted that Microsoft would be introducing new categories of digital experiences in the near future. 

A report published in TechCrunch also suggests that OpenAI would continue as a capped-profit company following the Microsoft deal, whereby the backers could expect returns pegged at 100 times their investments or possibly less. In other words, the returns have been capped at 100 times of their investments, the quantum of which currently remains undisclosed. 


Open AI needed money and fast

Of course, it goes without saying that Microsoft Azure would continue to be the exclusive cloud provider for OpenAI, powering the startup’s humongous workloads across products, API services and research. We had reported earlier that ChatGPT, a popular AI-powered chatbot, could soon become chargeable as OpenAI was finding it tough to cough up server costs. 

Open AI had said the monetized version of ChatGPT would be called ChatGPT Professional and that there was a waitlist link that OpenAI posted on the server. It asks a wide range of questions to users around payment preferences including a specific query about the price point that one would consider ChatGPT to be too expensive to reconsider a purchase. 


What exactly is the new deal about?

The three specific areas where Microsoft intends to expand its investments include supercomputing at scale, new AI-powered experiences and cloud services. Here is what the Microsoft blog says about these three facets: 

  • Supercomputing at scale: Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.
  • New AI-powered experiences – Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology. This includes Microsoft’s Azure OpenAI Service, which empowers developers to build cutting-edge AI applications through direct access to OpenAI models backed by Azure’s trusted, enterprise-grade capabilities and AI-optimized infrastructure and tools.
  • Exclusive cloud provider – As OpenAI’s exclusive cloud provider, Azure will power all OpenAI workloads across research, products and API services.

In the past Microsoft had announced a $1 billion investment in OpenAI in 2019 to jointly develop new technologies for the Azure platform and extend OpenAI’s large-scale AI capabilities. A year later, the company revealed that it had built an Azure-hosted OpenAI co-designed supercomputer that was among the most powerful. In 2021, Microsoft launched the Azure OpenAI Service designed to give enterprises access to OpenAI’s AI systems including GPT-3 along with security, compliance, governance and other business-focused features.

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