Microsoft is in talks to invest $10 billion into the owner of ChatGPT, the wild-growing AI-powered chatbot that has taken the world by storm, Semafor reports, citing people with knowledge of the matter.
Microsoft is considering investing as much as $10 billion in OpenAI — the creator of viral artificial intelligence tools ChatGPT and Dall-E 2 — according to numerous news outlets. Microsoft (parent company of LinkedIn) will reportedly get 75% of OpenAI’s profits until it recoups its investment, Semafor reports; it would then take a 49% stake in the startup. OpenAI’s ChatGPT generative language technology could be used to help power Microsoft’s search engine Bing, and also be incorporated into Office applications such as Word and Outlook, according to The Information. Microsoft was an early backer of OpenAI, investing $1 billion in the startup in 2019. (LinkedIn News)
If the deal goes through, it will expand Microsoft’s investment in OpenAI, the firm behind ChatGPT, to about $11 billion. The tech company had in 2019, betted $1 billion in OpenAI, and has an exclusive license to use its text generator AI GPT-3.
Per Semafor, Microsoft’s new funding, which would also include other venture firms, is expected to shoot the value of OpenAI to $29 billion, the people familiar with the deal said. The report said it’s not clear if the deal has been finalized but documents sent to prospective investors in recent weeks outlining its terms indicated a targeted close by the end of 2022.
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Semafor, quoting the people, said Microsoft’s infusion would be part of a complicated deal in which the company would get 75% of OpenAI’s profits until it recoups its investment. The report further noted that it’s not clear whether money that OpenAI spends on Microsoft’s cloud-computing arm would count toward evening its account.
“After that threshold is reached, it would revert to a structure that reflects ownership of OpenAI, with Microsoft having a 49% stake, other investors taking another 49% and OpenAI’s nonprofit parent getting 2%. There’s also a profit cap that varies for each set of investors — unusual for venture deals, which investors hope might return 20 or 30 times their money. The terms and the investment amount could change, and the deal could fall apart,” the report said.
ChatGPT has become popular among internet users since it was launched last year, due to its ability to add context to queries. It uses GPT-3.5, a large language model released last year, to generate answers and authentic-looking responses to queries about all topics. With the GPT-3.5-powered ability, ChatGPT helps users to accomplish tasks such as creating poems, composing college essays and writing code.
Last week, Microsoft reportedly moved to incorporate ChatGPT into Bing, its search engine, in a push geared toward wrestling more shares of web queries from rival Google. Bing believes that using the technology will help its search results provide more humanlike answers to queries.
The swift rise of ChatGPT to the spotlight has ignited a wave of interest in OpenAI. With its push toward a $29 billion valuation, ChatGPT is reportedly allowing early investors and employees to sell their shares. It is not clear if there are other Silicon Valley big names, besides Microsoft, queuing behind OpenAI.
It isn’t clear whether the deal has been finalized but term sheets sent to prospective investors indicated the plan was to close the deal by the end of 2022, Semafor reported.
Microsoft will reportedly get a 75% share of OpenAI’s profits until it makes back the money on its investment, after which the company would assume a 49% stake in OpenAI.
Microsoft and OpenAI were not immediately available for comment when contacted by CNBC.