- General
- July 22, 2019
- 5 minutes read
Microsoft Bets $1 Billion On OpenAI
OpenAI CEO Sam Altman (left) and Microsoft CEO Satya Nadella image: Microsoft Microsoft has announced it’s investing $1 billion into…
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| OpenAI CEO Sam Altman (left) and Microsoft CEO Satya Nadella
image: Microsoft
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Microsoft has announced it’s investing $1 billion into OpenAI, an AI company founded by Elon Musk and Y Combinator chairman Sam Altman. The investment is part of a partnership between both companies to work on AI systems. Under the partnership, OpenAI and Microsoft will jointly develop new AI supercomputing technologies for Microsoft Azure. OpenAI is also porting its services to run on Microsoft Azure and will make Microsoft its preferred partner for commercialization of new AI technologies.
In simple terms, both companies will do joint R&D work on AI technologies. Both parties stand to benefit from this partnership, with OpenAI getting significant funding for its operations while Microsoft gets first-hand access to new AI technologies that may result from OpenAI’s expertise. As both companies work on Microsoft Azure, any resulting AI enhancements also stands to benefit developers who are building AI applications on the cloud-computing platform.
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| Reid Hoffman, a Microsoft board member and OpenAI backer
image: TechCrunch on Flickr
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OpenAI was launched in 2015 with a $1 billion pledge from tech luminaries including Elon Musk, Peter Thiel, Reid Hoffman, Y Combinator’s Jessica Livingston, and companies like Amazon Web Services and Infosys. Originally a non-profit, OpenAI shifted to a “capped profit” model earlier this year. As per its announcement, the “capped profit” model meant returns for its first round of investors are limited to 100x the amount they put in. Any excess returns are funneled to a separate non-profit arm. OpenAI said returns for later investors [like Microsoft] will be capped at lower rates. The cap rates are negotiated in advance by both parties.
Microsoft’s $1 billion bet happens to be a pursuit of fuel for Azure, a key driver in Microsoft’s growth that has sprouted the company to record highs on the stock market. As of writing, Microsoft has a market cap above $1 trillion. Just days ago, the software giant posted solid Q4 results that showed 19% year-on-year growth for its cloud division, and nearly 50% year-on-year profit growth.
