Wall Street: Microsoft's $13 billion OpenAI investment is "the best money ever spent"

What you need to know

Despite recently emerging issues between Microsoft and OpenAI’s multibillion-dollar partnership, some Wall Street analysts say the $13 billion investment is “one of the best sums ever spent.”
The analysts attribute their sentiments to Microsoft’s exclusive cloud computing services agreement with OpenAI and the strong integration of the ChatGPT maker’s AI smarts into its tech stack.
OpenAI may struggle to secure adequate funding for its cutting-edge AI projects as predictions suggest interest in the AI bubble is quickly disappearing.

In recent years, Microsoft’s focus has seemingly shifted to generative AI, especially since then billions of investments in OpenAI. Admittedly, it was mainly a strategic move by Microsoft, which made it for a short time the most valuable company in the world, ahead of Apple and NVIDIA. The latter two also tasted the crown, together with market analysts and experts They attribute their exponential growth to an early investment in generative AI.

Microsoft’s AI bubble chase has also faced critical setbacks and bottlenecks. For example, OpenAI’s board of directors has ousted Sam Altman as CEO late last year. The move sparked controversy and was met with reservations from employees who stated, “OpenAI is nothing without its people.” Altman was reinstated as CEO a few days later.

Interestingly enough, the rumors indicated that Microsoft was getting ready to set up shop at OpenAI’s San Francisco headquarters at its LinkedIn offices. The Redmond giant was reportedly gearing up for the launch a new AI division with Sam Altman and Greg Brockman at the helm.

Earlier this year, Microsoft announced an internal reorganization, bringing together products such as Microsoft Edge, Bing and Microsoft Copilot. a new Microsoft AI division run by Mustafa Suleyman, co-founder of Deep Mind.

Microsoft’s evolving partnership with OpenAI remains complicated amid many issues, including regulations, bankruptcy claims and investor concerns about a clear profitable path.

Microsoft insiders have also raised concerns about the tech giant’s relationship with the ChatGPT maker, citing that it has seemingly become an overnight occurrence.glorified IT department for the hot startupA former Microsoft executive claimed that the partnership between OpenAI and Microsoft contributed to the death of products like Azure Cognitive Search, Azure AI Bot Service, and Kinect DK.

As you may know, OpenAI was recently at the The eve of bankruptcy with predictions of $5 billion in losses over the next twelve months. The ChatGPT maker managed to get out of this difficult situation through a new round of financing from investors, including Microsoft and NVIDIA. Raised $6.6 billionultimately bringing the market capitalization well above $157 billion.

Previously, investors began to express concerns about Microsoft’s high spending on AI projects with little to no return to show for it. Market analysts and experts predict that the AI hype is slowly fading, potentially driving investors away from generative AI investments and prompting them to channel their money elsewhere. One report suggests so 30% of AI projects will be stopped by 2025 after proof of concept.

OpenAI is spending large amounts of money on its AI advancements, which may explain why it is in its eighth round of funding. For context, tThe AI company spends up to $700,000 every day to keep ChatGPT running. However, the ChatGPT creator’s recent funding round puts it in a difficult situation and forces it to do so to become a for-profit company within the next two years or risk paying back the money raised by investors outside interference and hostile takeovers. This has prompted some market analysts to predict this Microsoft could acquire OpenAI within three years.

The transition to a for-profit business faces many challenges from executives, regulators and the government. OpenAI is currently waging a legal battle in the corridors of justice over the same issue. Billionaire and former co-founder of OpenAI Elon Musk has filed a lawsuit against OpenAI and Sam Altman, stating “a stark betrayal of the company’s founding mission” in addition to alleged involvement in racketeering activities.

Microsoft’s $13 billion OpenAI investment was money well spent

OpenAI logo on an Android phone.

OpenAI logo on an Android phone (Image credit: Getty Images | SOPA Images)

While problems like OpenAI snubs Windows and exclusively shipping ChatGPT’s desktop app to Apple’s macOS may seem like a dead ringer for its partnership with Microsoft, Microsoft has a track record of reaping plenty of benefits from the best ‘bromance’ in tech (via The motley fool).

Microsoft has been exclusively providing cloud computing services to OpenAI since its inception due to its cutting-edge and cutting-edge AI advancements. This is evident from a recent report Microsoft will take a 20% cut of OpenAI’s revenue stream because of his early investment. However, OpenAI could continue to run on smoke, Suffering $44 billion in losses before turning a profit in 2029.

Subsequently, Microsoft heavily integrated OpenAI’s AI smarts into its tech stack, prompting it to launch AI-powered products and services such as Microsoft 365 Copilot and Azure OpenAI service. The platform helps automate redundant and repetitive tasks in Word, PowerPoint and Excel, driving 70% adoption by Fortune 500 companies.

Echoing the highlighted opportunities presented to Microsoft through its strategic partnership with OpenAI, several Wall Street analysts are touting the $13 billion investment as “one of the best sums ever spent.”