AI

Microsoft invests billions more dollars in OpenAI, extends partnership

Comment

OpenAI's logo
Image Credits: OpenAI

Microsoft today said that it’s extending its partnership with OpenAI, the startup behind art- and text-generating AI systems like ChatGPT, DALL-E 2 and GPT-3, with a “multi-year, multi-billion-dollar” investment. OpenAI says that the infusion of new capital — the exact amount of which wasn’t disclosed — will be used to continue its independent research and develop AI that’s “safe, useful and powerful.”

The optics aren’t the best for Microsoft, which just last week announced plans to lay off 10,000 employees as a part of broader cost-cutting measures. But they’d been telegraphed by the company earlier this month — in an interview with The Wall Street Journal, Microsoft CEO Satya Nadella said that Microsoft planned to make OpenAI’s foundational systems available as commercials platforms so that any entity in any industry can build on them.

OpenAI will remain a capped-profit company as a part of the new investment deal with Microsoft. Under the model, backers’ returns are limited to 100 times their investment — or possibly less in the future.

In a blog post, Microsoft said that it will increase its investments in the deployment of specialized supercomputing systems to accelerate OpenAI’s AI research and integrate OpenAI’s AI systems with its products while “introducing new categories of digital experiences.” The tech giant’s Azure cloud platform will continue to be OpenAI’s exclusive cloud provider, powering the startup’s workloads across research, products and API services.

Microsoft was previously rumored to be preparing a ChatGPT integration with Bing search results as well as bringing OpenAI’s language AI technology into apps like Word, PowerPoint and Outlook. Several years ago, Microsoft-owned GitHub jointly developed and launched Copilot, a code-generating AI system. And Microsoft has incorporated OpenAI innovations including GPT-3 and DALL-E 2 into apps and services like Power Apps, Microsoft Edge and the forthcoming Designer.

The efforts build on Microsoft and OpenAI’s years of close collaboration. In 2019, Microsoft announced that it would invest $1 billion in OpenAI (roughly half in the form of Azure credits) to jointly develop new technologies for the Azure platform and “further extend” OpenAI’s large-scale AI capabilities. In exchange, OpenAI agreed to license some of its intellectual property to Microsoft, which the company would subsequently commercialize and sell to partners, and train and run AI models on Azure as OpenAI worked to develop next-gen computing hardware.

A year later, Microsoft revealed it’d built an Azure-hosted, OpenAI-co-designed supercomputer that at the time was among the most powerful machines in the world. Then in 2021, Microsoft launched the Azure OpenAI Service, an offering designed to give enterprises access to OpenAI’s AI systems including GPT-3 along with security, compliance, governance and other business-focused features.

The New York Times reports that Microsoft invested an additional $2 billion in OpenAI between 2019 and early 2023. The tech giant also became a key backer of OpenAI’s Startup Fund, OpenAI’s AI-focused venture and tech incubator program.

“We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform,” Nadella said in a statement. “In this next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models and toolchain with Azure to build and run their applications.”

“The past three years of our partnership have been great,”OpenAI CEO Sam Altman added in a press release. “Microsoft shares our values and we are excited to continue our independent research and work toward creating advanced AI that benefits everyone.”

Sources previously reported that Microsoft was looking to net a 49% stake in OpenAI, valuing the company at around $29 billion. Under the terms of one proposal detailed by Semafor, Microsoft would receive three-quarters of OpenAI’s profits until it recovers an investment as high as $10 billion, with additional investors including Khosla Ventures taking 49% and OpenAI retaining the remaining 2% in equity.

OpenAI is under pressure to turn a profit on products like ChatGPT. The startup expects to make $200 million in 2023 from licensing and premium products like ChatGPT Professional, a pittance compared to the billions of dollars that have been invested in it so far.

To blame are the high costs of training, developing and running large AI systems. According to Altman, ChatGPT’s operating expenses alone are “eye-watering,” amounting to a few cents per chat in compute costs. (As of early December, ChatGPT had over a million users.) Meanwhile, GPT-3 is estimated to have cost millions of dollars to launch.

OpenAI — and Microsoft, by extension — face steep legal challenges that threaten to impede the growth of their AI explorations. The U.S. Patent and Trademark Office (USPTO) recently moved to revoke copyright protection for an AI-generated comic, saying copyrightable works require human authorship. And Microsoft, GitHub and OpenAI are currently being sued in a class action lawsuit that accuses them of violating copyright law by allowing Copilot, the aforementioned code-generating system, to regurgitate sections of licensed code without providing credit.

Some legal experts have argued that Copilot could put companies at risk if they were to unwittingly incorporate copyrighted suggestions from the tool into their production software. As Elaine Atwell notes in a piece on Kolide’s corporate blog, because Copilot strips code of its licenses, it’s difficult to tell which code is permissible to deploy and which might have incompatible terms of use.

The lawsuit also has implications for generative art AI like DALL-E 2, which similarly has been found to copy and paste from the datasets on which they were trained (i.e. images). Several OpenAI competitors were recently targeted in a legal case that alleges that they infringed the rights of “millions of artists” by training AI art-generating tools on billions of images scraped from the web “with­out the con­sent of the orig­i­nal artists.”

Platforms like Getty Images have banned AI-generated content for fear of potential legal blowback.

Legal issues aside, OpenAI’s text-generating tech has come under fire for its ability to sometimes give answers that sound convincing but aren’t factually true. Earlier this month, Q&A coding site Stack Overflow temporarily banned users from sharing content generated by ChatGPT, saying the AI made it too easy for users to generate responses and flood the site with dubious answers. ChatGPT has also been banned by several public school systems and at least one academic conference.

That’s all to say that OpenAI and Microsoft have their work cut out for them.

More TechCrunch

Welcome to Week in Review: TechCrunch’s newsletter recapping the week’s biggest news. This week Apple unveiled new iPad models at its Let Loose event, including a new 13-inch display for…

Why Apple’s ‘Crush’ ad is so misguided

The U.K. Safety Institute, the U.K.’s recently established AI safety body, has released a toolset designed to “strengthen AI safety” by making it easier for industry, research organizations and academia…

U.K. agency releases tools to test AI model safety

AI startup Runway’s second annual AI Film Festival showcased movies that incorporated AI tech in some fashion, from backgrounds to animations.

At the AI Film Festival, humanity triumphed over tech

Rachel Coldicutt is the founder of Careful Industries, which researches the social impact technology has on society.

Women in AI: Rachel Coldicutt researches how technology impacts society

SAP Chief Sustainability Officer Sophia Mendelsohn wants to incentivize companies to be green because it’s profitable, not just because it’s right.

SAP’s chief sustainability officer isn’t interested in getting your company to do the right thing

Here’s what one insider said happened in the days leading up to the layoffs.

Tesla’s profitable Supercharger network is in limbo after Musk axed the entire team

StrictlyVC events deliver exclusive insider content from the Silicon Valley & Global VC scene while creating meaningful connections over cocktails and canapés with leading investors, entrepreneurs and executives. And TechCrunch…

Meesho, a leading e-commerce startup in India, has secured $275 million in a new funding round.

Meesho, an Indian social commerce platform with 150M transacting users, raises $275M

Some Indian government websites have allowed scammers to plant advertisements capable of redirecting visitors to online betting platforms. TechCrunch discovered around four dozen “gov.in” website links associated with Indian states,…

Scammers found planting online betting ads on Indian government websites

Around 550 employees across autonomous vehicle company Motional have been laid off, according to information taken from WARN notice filings and sources at the company.  Earlier this week, TechCrunch reported…

Motional cut about 550 employees, around 40%, in recent restructuring, sources say

The deck included some redacted numbers, but there was still enough data to get a good picture.

Pitch Deck Teardown: Cloudsmith’s $15M Series A deck

The company is describing the event as “a chance to demo some ChatGPT and GPT-4 updates.”

OpenAI’s ChatGPT announcement: What we know so far

Unlike ChatGPT, Claude did not become a new App Store hit.

Anthropic’s Claude sees tepid reception on iOS compared with ChatGPT’s debut

Welcome to Startups Weekly — Haje‘s weekly recap of everything you can’t miss from the world of startups. Sign up here to get it in your inbox every Friday. Look,…

Startups Weekly: Trouble in EV land and Peloton is circling the drain

Scarcely five months after its founding, hard tech startup Layup Parts has landed a $9 million round of financing led by Founders Fund to transform composites manufacturing. Lux Capital and Haystack…

Founders Fund leads financing of composites startup Layup Parts

AI startup Anthropic is changing its policies to allow minors to use its generative AI systems — in certain circumstances, at least.  Announced in a post on the company’s official…

Anthropic now lets kids use its AI tech — within limits

Zeekr’s market hype is noteworthy and may indicate that investors see value in the high-quality, low-price offerings of Chinese automakers.

The buzziest EV IPO of the year is a Chinese automaker

Venture capital has been hit hard by souring macroeconomic conditions over the past few years and it’s not yet clear how the market downturn affected VC fund performance. But recent…

VC fund performance is down sharply — but it may have already hit its lowest point

The person who claims to have 49 million Dell customer records told TechCrunch that he brute-forced an online company portal and scraped customer data, including physical addresses, directly from Dell’s…

Threat actor says he scraped 49M Dell customer addresses before the company found out

The social network has announced an updated version of its app that lets you offer feedback about its algorithmic feed so you can better customize it.

Bluesky now lets you personalize main Discover feed using new controls

Microsoft will launch its own mobile game store in July, the company announced at the Bloomberg Technology Summit on Thursday. Xbox president Sarah Bond shared that the company plans to…

Microsoft is launching its mobile game store in July

Smart ring maker Oura is launching two new features focused on heart health, the company announced on Friday. The first claims to help users get an idea of their cardiovascular…

Oura launches two new heart health features

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI considers allowing AI porn

Garena is quietly developing new India-themed games even though Free Fire, its biggest title, has still not made a comeback to the country.

Garena is quietly making India-themed games even as Free Fire’s relaunch remains doubtful

The U.S.’ NHTSA has opened a fourth investigation into the Fisker Ocean SUV, spurred by multiple claims of “inadvertent Automatic Emergency Braking.”

Fisker Ocean faces fourth federal safety probe

CoreWeave has formally opened an office in London that will serve as its European headquarters and home to two new data centers.

CoreWeave, a $19B AI compute provider, opens European HQ in London with plans for 2 UK data centers

The Series C funding, which brings its total raise to around $95 million, will go toward mass production of the startup’s inaugural products

AI chip startup DEEPX secures $80M Series C at a $529M valuation 

A dust-up between Evolve Bank & Trust, Mercury and Synapse has led TabaPay to abandon its acquisition plans of troubled banking-as-a-service startup Synapse.

Infighting among fintech players has caused TabaPay to ‘pull out’ from buying bankrupt Synapse

The problem is not the media, but the message.

Apple’s ‘Crush’ ad is disgusting

The Twitter for Android client was “a demo app that Google had created and gave to us,” says Particle co-founder and ex-Twitter employee Sara Beykpour.

Google built some of the first social apps for Android, including Twitter and others