Microsoft’s $10 Billion Bet on OpenAI:
According to recent reports, Microsoft (MSFT) is in talks to significantly increase its investment in artificial intelligence startup OpenAI, with a $10 billion investment to make its Bing search engine a stronger rival to Alphabet’s (GOOGL) Google. This move may have a positive impact on Microsoft stock as the company invested $1 billion in OpenAI in 2019 and the new investment would be a part of a new funding round for the AI startup.
Potential Applications for OpenAI’s Technologies:
OpenAI’s technologies include ChatGPT, a chatbot that could give Microsoft Bing a stronger competition to Google’s internet search, and image-generation program Dall-E2. With ChatGPT’s ability to provide human-like answers to questions and generate documents, Microsoft is likely to integrate ChatGPT into its Bing internet search app. Dall-E2 has already been integrated into Microsoft’s graphics design software, suggesting other OpenAI tools could also be integrated into Microsoft’s email platform Outlook and office productivity tools such as Word.
Impact on MSFT and GOOGL Stock:
The Bing search engine holds nearly 9% of the market, while Google commands roughly 84%, according to Statista. However, with OpenAI’s partnership, Microsoft could see a boost in its Azure cloud business. Oppenheimer analyst Tim Horan predicts that the partnership could lead to dozens of new services leveraging Azure’s robust infrastructure. Horan explains, “These services will include true digital assistants, AI-based legal, accounting, financial services and dozens more. This consumer AI will then be used in enterprise (applications) in equally surprising ways.”
Background on OpenAI:
OpenAI has been using Microsoft’s Azure cloud computing unit to develop “generative AI” software tools that create new content from large public data sets. The startup uses machine learning techniques to train AI models and the machine learning software is able to process various forms of data including text, images, voice recordings, and programming code. Generative AI is not just limited to internet search, but also has applications in marketing/copywriting, drug and material development, video gaming, and digital art.
Google’s Investment in AI and Cloud Computing:
In comparison, Google has a significant investment in AI and cloud computing, partnering with start-up Cohere, a rival of OpenAI, and owning DeepMind Technologies, a U.K.-based AI research laboratory. Google has also developed generative AI tools called Language Model for Dialog Applications, known as LaMDA, which uses technology similar to OpenAI’s. According to a Bank of America report, Google has invested approximately $120 billion in artificial intelligence and cloud computing since 2016.
It appears that the reports of Microsoft’s increased investment in OpenAI have had a positive effect on both MSFT and GOOGL stock. MSFT stock gained 0.8% and GOOGL stock edged up 0.5% as the news emerged, which could suggest that investors believe the increased investment in OpenAI will have a positive impact on both companies