Microsoft CEO Nadella retargets Google through talks with OpenAI

 Microsoft (280.57, 2.91, 1.05%) CEO Satya Nadella is preparing the largest venture capital investment in the company's history, hoping to give the software giant a head start in a similar race to integrate advanced artificial intelligence tools into search engines and applications, Google(106.06, -0.20, -0.19%).

ChatGPT, which can surprisingly generate human-like conversational text based on prompts or queries, has become an internet sensation since it went live in late November last year, accumulating its first million users in less than a week. Its ability to mimic a real person's ability to speak and write has sparked concerns that it could replace professional writers and do homework for students. The tool is also considered a potential threat to Google's core search business.

Redmond, Wash.-based Microsoft has previously partnered with OpenAI, investing $1 billion in the startup in 2019. Currently, the company is using OpenAI's language artificial intelligence technology to add automation functions to subsidiary GitHub's Copilot programming tool and is preparing to apply this technology to its Bing search engine, Office productivity applications, Teams collaboration programs, and security software. The software developer will also integrate OpenAI's other influencer app, the image creation tool DALL-E, into the design software.

While Nadella seeks to strengthen cooperation with OpenAI, Google's long-standing almost unmatched situation in the search field has suddenly become an opportunity to take advantage of. Google's usual keyword query mode is to use the search engine to search for specific words on the Internet, and then let users decide which information is useful.

In contrast, ChatGPT will give detailed explanations when answering questions about political science and computer programming, and its question-and-answer format means that users can drill down until they fully understand. The bot answers inquiries, strikes up a conversation, and answers follow-up questions in a natural and human way, as opposed to the basic list of blue links Google Search provides.

ChatGPT also has shortcomings. Unlike Google Search or Microsoft's own Bing, ChatGPT currently does not provide context on the sources of information used to construct answers, and OpenAI acknowledges that the tool's answers may not be correct and should not be considered accurate or trustworthy.

According to data compiled by Genbow, putting $10 billion into OpenAI would easily exceed any investment Microsoft has made to date, including a $5 billion stake in 1999. AT&T(18.61, 0.15, 0.81%) company (AT&T Inc.), in exchange for a position in the new set-top box market, and the 1997 Comcast(35.92, -0.05, -0.14%) (Comcast) $1 billion investment.

This amount will also exceed the amount of almost all of Microsoft's acquisitions in recent years, except for three. Microsoft buys video game developers for $69 billion Activision Blizzard (84.39, 4.71, 5.91%) transaction has entered the antitrust approval process. In 2016, Microsoft spent $26 billion to acquire LinkedIn, a social platform for the workplace. Last year, Microsoft completed its $20 billion acquisition of Nuance Communications Inc., an artificial intelligence technology company focused on speech recognition and related software and services in the healthcare sector.

Purchasing OpenAI is not a problem due to Microsoft's balance sheet having more than $100 billion in cash and cash equivalents. Recent investment talks reportedly valued the startup at $29 billion, but it's unclear whether OpenAI has considered selling the company as a whole.

Microsoft may invest in ChatGPT along with venture capital firms such as Thrive capital and Founders Fund. The two venture capital firms are discussing investment intentions including spending $300 million to acquire shares from OpenAI's existing shareholders.

According to the news platform Semafor, according to the transaction plan under discussion, Microsoft will receive 75% of OpenAI's profit share until the investment is recovered, after which Microsoft will obtain 49% of OpenAI's shares. Semafor said it was uncertain whether the agreement had been reached, but that documents explaining the agreement distributed to possible investors recently indicated that it was planned to conclude by the end of 2022.

Microsoft itself has been practicing artificial intelligence projects for dozens of consecutive years and has made significant progress in fields such as speech and image recognition. The company released an artificial intelligence model last week that simulates a user's voice using short audio samples. But in recent years, it has been OpenAI's large-scale models for generating language and images that have set the agenda for the field of artificial intelligence.

The increased stake will put Microsoft in a good position to develop OpenAI's technology on the Azure cloud platform. Azure is one of Microsoft's fastest-growing businesses and a priority. can also prevent amazon (98.13, -0.58, -0.59%) Web Services (Amazon Web Services) and competitors such as Google from obtaining OpenAI products.

Microsoft's search engine Bing has a small share of the global search engine market, and the integration of ChatGPT into Bing and a new agreement with OpenAI may help Microsoft weaken Google's market share by providing more advanced search functions. dominance. According to technology media The Information, Microsoft is also discussing incorporating the technology into its Outlook email and Word document processing platform.

While much of the hype associated with ChatGPT revolves around the prospect of the possible demise of human writers, and the risk of schoolchildren using it to cheat, Microsoft's tool is geared toward businesses to help automate programming, writing, and image generation.

"A potential $10 billion investment in OpenAI could bolster Microsoft's major product lines such as Office, Bing, LinkedIn, and GitHub," said Anurag Rana, an analyst at Bloomberg Intelligence. While most of these products have already begun to embed enhanced AI, the success of ChatGPT products can improve productivity; for example, recommending the best sales leads to users on LinkedIn, or enhancing the search capabilities of Bing.”

Microsoft has said it will integrate Dall-E into its design applications and make it available to select OpenAI cloud customers on Azure. Mattel Inc., for example, is currently using Dall-E with the Azure cloud platform to generate images of toy cars the company might want to design.

Microsoft's programming code library GitHub is also using OpenAI's language artificial intelligence technology to develop a program called GitHub Copilot to help programmers. As programmers type, Copilot suggests snippets of code that might appear next in the program, similar to a trained auto-completion bot that can communicate in the languages ​​Python or JavaScript. It is especially useful for complementing programming tasks that amount to manual labor, that is, necessary but not particularly complex or creative code snippets.

Microsoft executives have said the company has plans to develop Copilot technology for use in similar programs in other work areas, including office work, video game design, architectural design, and computer security.