Love in the Time of Code: How Microsoft and Open AI’s Unlikely Union Redefines the Future of Tech

If there is a romance that could only exist in technology heaven, it would be the relationship between Microsoft and Open AI. Microsoft was an early investor, investing $1 billion in OpenAI, and the startup OpenAI was able to use this investment to develop a groundbreaking generative AI-based chatGPT and become a leading player in the current generative AI craze.

OpenAI, which received investment, has grown into the world’s most influential AI startup. (Microsoft has since invested another $13 billion.)

Thanks to its foresight, Microsoft also took the lead in AI, using ChatGPT as the foundation for its Co-Pilot line of tools. It owns a significant portion of OpenAI and has earned billions of dollars in profits through this relationship.

Along the way, the two companies lobbied Congress together, strategized together, and seemed to move together in almost every way. When OpenAI ousted Sam Altman as CEO last year, Microsoft CEO Satya Nadella worked behind the scenes to reinstate him.

Their relationship was so close that Altman called it “the best bromance in tech.” “We love you,” Nadella told Altman in front of a large audience at a conference hosted by OpenAI last year. Altman also agreed.

If it were a movie, I would have thought the romance was so touching and obvious. But now it’s all a story of the past. The two drew their swords at each other.

Actually, few people will be surprised. Last March, the author also pointed out that the two companies “look more like enemies than friends.” I have pointed out that Altman and OpenAI COO Brad Wrightcap are publicly trying to lure companies away from Microsoft’s Co-Pilot and towards OpenAI’s enterprise ChatGPT. Reuters reported that Altman and Rightcap courted more than 300 corporate executives in New York, San Francisco, and London, emphasizing the advantage of working with OpenAI, which built its own technology instead of Microsoft’s indirectly generative AI technology. It was reported that he expressed antipathy toward Microsoft.

Nadella previously targeted Open AI, saying, “Even if Open AI disappears tomorrow, Microsoft holds all intellectual property rights and capabilities. It has manpower, computing, data, everything. Microsoft is above and below Open AI. There was an attack that said, “Eh, it’s all around, everywhere.”

From worst to worst

Since then the situation has worsened. There are many reasons for the fight, but the biggest one, as many people assume, is money.

Microsoft’s $14 billion investment in OpenAI includes not only cash but also computing resources, particularly the massive amounts of computing power needed to train and run OpenAI’s technology. The most recent cash injection came in early October, when OpenAI raised $6.6 billion from investors including several banks, investment funds, Microsoft and AI chipmaker Nvidia. (Of this, $1 billion was reportedly invested by Microsoft.)

After attracting investment, OpenAI’s corporate value is estimated to reach $157 billion. But even this was not enough for Open AI. The conflict of opinion started here. Despite a valuation of $157 billion, OpenAI’s spending continues to soar, burning through cash and losing $5 billion a year. This is not a problem that will be solved anytime soon. In fact, the situation is likely to get worse.

According to the New York Times, by 2029, Open AI will spend $37.5 billion per year on computing costs, net of salaries, rent, and other costs for companies.

Therefore, OpenAI wants Microsoft to provide more computing power. And Microsoft is hesitating. The Times points out: “OpenAI employees complain that Microsoft doesn’t provide enough computing power… And some say that if other companies succeed in creating AI that matches the human brain, Microsoft won’t provide the computing power OpenAI needs. “Soft is complaining that it will have to take responsibility,” the report said.

OpenAI is currently turning to other sources to secure these computational resources. It recently signed a contract worth nearly $10 billion with Oracle. Microsoft and OpenAI recently renegotiated how much of Microsoft’s computing power would be valued in monetary terms, but it is unclear whether the new agreement will lower or increase the monetary value.

Microsoft is wary of relying too much on Open AI for its AI future. It spent more than $650 million to hire nearly all of OpenAI competitor Inflection’s staff. In addition, Mustafa Suleiman, former CEO and co-founder of Inflection, was hired as head of Microsoft’s AI business. Suleiman and OpenAI have already clashed several times, and the situation is expected to worsen as Altman becomes increasingly dissatisfied with Suleiman’s hiring.

Gil Luria, an analyst at investment bank DA Davidson, predicted to the Times, “If Microsoft only uses OpenAI technology, it may fall behind. When true competition begins, OpenAI may not be able to win.”

What’s next?

All of this is just a prelude. The biggest question is whether Microsoft’s continued investment in Open AI will be recognized as a fair market value. OpenAI was originally founded as a non-profit company, and Microsoft invested heavily during that period, so it can be said to be a very complex problem. Since then, the essence of Open AI has transformed into a for-profit company.

The Wall Street Journal reported that the two companies have hired an investment bank to negotiate the issue. When investment banks get involved, it’s no longer a sword-wielding fight, but flamethrowers come into play. This means that the fight between the two companies has just begun.

Who will win? OpenAI’s corporate value is $157 billion, so it is by no means a weak competitor. However, at the time of writing, Microsoft is worth $3.19 trillion. And Nadella, known for his humble and friendly demeanor, is actually much closer to a shark than Altman. If I were you, I would bet on Microsoft.
editor@itworld.co.kr