Microsoft’s bet on OpenAI gives it a first-mover advantage over Google in the age of artificial intelligence.
Now Microsoft is integrating OpenAI’s technology into multiple businesses including Bing search engine, GitHub coding tools, Microsoft 365 and Microsoft cloud Azure, which is expected to bring Microsoft tens of billions of dollars in new revenue every year.
This also makes Microsoft’s once low-key investment in OpenAI a topic closely watched by venture capital circles and secondary market investors. The valuation of OpenAI has reached nearly 30 billion U.S. dollars, and in the past three months, Microsoft’s stock price has risen by more than 30%.
OpenAI is on track to generate $200 million in revenue this year, up 150% from 2022, according to research firm PitchBook. The agency predicts that OpenAI could reach $1 billion in revenue by 2024, which would represent a quadruple from current levels.
A reporter from China Business News learned that the world‘s top AI experts, including the Chinese artificial intelligence scientist who has the closest relationship with OpenAI and former Baidu executive Lu Qi, are optimistic about the huge commercial prospects of OpenAI. Lu Qi recently put forward his point of view at an internal sharing meeting. He predicted that OpenAI’s future market value will be several times that of Google, and may even become the world‘s first company with a market value exceeding US$10 trillion.
“Lu Qi judges that the GPT large-scale model is a very important information revolution, because all technology companies have undertaken the work of information handling before, but this time is completely different. The large-scale model will turn the marginal cost of AI into a fixed cost. With the increase of users, this cost will approach zero.” A person who participated in the internal sharing meeting told the first financial reporter.
However, according to a blog post published by two OpenAI executives in 2019, the company at the time limited OpenAI’s first investors from earning more than 100 times the money they put in by setting up a “profit cap” entity called OpenAI LP. , while for investors such as Microsoft who entered later, their return on profits is even lower. This means that after Microsoft recoups its investment, it will receive a percentage of OpenAI LP’s profits, up to an agreed-upon cap, with the rest going to the nonprofit.
This kind of “profit ceiling” business model is not common in Silicon Valley. In Silicon Valley, “maximizing return on investment” has long been a top priority in the venture capital community. Elon Musk, one of OpenAI’s founders and early backers, has tweeted several times this year about his concerns about OpenAI’s ownership structure, especially given Microsoft’s control.
“OpenAI was originally created as an open source (that’s why I named it ‘Open’AI), non-profit company as a counterweight to Google, but it has now become a closed source, profit maximizing company , effectively controlled by Microsoft.” Musk tweeted in February, “This is not what I want at all.”
Microsoft is not only an investor in OpenAI, but as the exclusive supplier of computing power for OpenAI research, products, and developer programming interfaces, Microsoft has provided the latter with a large amount of capital and resources. With so many companies scrambling to integrate their products with OpenAI, that means a lot of workloads are running on Microsoft’s cloud servers.
Wells Fargo analyst Michael Turrin estimated in a report that OpenAI’s capabilities could bring Microsoft more than $30 billion in New Year’s revenue, about half of which will come from Azure.
Although Microsoft did not disclose the size of its AI business, Microsoft CEO Satya Nadella said in October last year that the revenue of Microsoft’s cloud Azure machine learning service has doubled for four consecutive quarters.
At Microsoft’s annual shareholder meeting in December last year, Nadella also said: “Even ChatGPT, one of the most popular artificial intelligence applications today, is trained on Azure supercomputers.”
In February of this year, Microsoft held a press conference at its headquarters in Redmond, Washington, USA, to announce new artificial intelligence updates to the Bing search engine and Edge browser. Microsoft invited Altman, CEO of OpenAI, as one of the speakers.
At present, with the help of OpenAI’s GPT large model, Microsoft has been able to launch Azure OpenAI cloud services for enterprises to help enterprises explore the potential of combining large-scale AI with business scenarios.
Microsoft’s growing grip on OpenAI is also fueling antitrust calls from skeptics more broadly. On March 28, the German antitrust regulator, the Bundeskartellamt, said it was reviewing Microsoft’s market power to assess whether it was harming competition.
Data and privacy protection is another challenge. Late last month, the nonprofit Center for Artificial Intelligence and Digital Policy called on the U.S. Federal Trade Commission (FTC) to block OpenAI from releasing a commercial version of its new GPT-4, saying the technology is “biased, deceptive, and harmful to privacy and public safety.” constitute a risk”.
European government agencies, including the Italian Data Supervisory Authority, are also discussing how to properly regulate artificial intelligence, protect personal information, and avoid stifling technological innovation.