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Microsoft to invest billions in OpenAI in quest to beat out Amazon, Google

Microsoft (MSFT) is making a multi-year, multi-billion dollar investment in OpenAI, the company behind the much discussed artificial intelligence-powered chatbot, ChatGPT. The move comes as Microsoft looks to add OpenAI’s capabilities to its own software offerings, giving it a potential edge over competitors ranging from Salesforce (CRM) to Google (GOOG, GOOGL).

“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,” Microsoft CEO Satya 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.”

Microsoft invested $1 billion in OpenAI in 2019. But the latest investment comes as the tech giant is contending with a round of layoffs that struck businesses ranging from its cloud services to gaming.

OpenAI has garnered enormous attention in recent years thanks to AI-powered apps including its DALL-E image platform and, more recently, the chatbot ChatGPT. Interest in ChatGPT exploded in November, when it became available for use by the general public.

In a statement, OpenAI said Microsoft’s investment will enable it to develop and research AI that is increasingly “safe, useful, and powerful.”

Microsoft Corp. CEO Satya Nadella speaks Wednesday, Dec. 2, 2015, at Microsoft's annual shareholders meeting in Bellevue, Wash. (AP Photo/Ted S. Warren)
Microsoft Corp. CEO Satya Nadella speaks Wednesday, Dec. 2, 2015, at Microsoft's annual shareholders meeting in Bellevue, Wash. (AP Photo/Ted S. Warren)

“We’ve worked together to build multiple supercomputing systems powered by Azure, which we use to train all of our models,” the company said in a statement.

“Azure’s unique architecture design has been crucial in delivering best-in-class performance and scale for our AI training and inference workloads. Microsoft will increase their investment in these systems to accelerate our independent research and Azure will remain the exclusive cloud provider for all OpenAI workloads across our research, API and products.”

Microsoft’s announcement comes at a perilous time, however. On Jan. 18, the company said it will layoff 10,000 employees by the end of its fiscal Q3. The move will also result in a $1.2 billion charge for the company.

OpenAI’s capabilities, however, have been touted as being a potential win for Microsoft, as it looks to build on the strength of its cloud business. Bringing OpenAI’s artificial intelligence capabilities to those platforms could give Microsoft a strong edge on rivals like market leader Amazon and third place Alphabet in the cloud industry.

There’s also talk of ChatGPT being a possible game changer for Microsoft’s Bing, giving the company what could be a major edge over Alphabet’s Google Search by providing users with easy to understand and conversational answers to their search queries.

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