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What Microsoft's new investment in OpenAI means for Google

The investment was expected as ChatGPT drew immediate worldwide attention. Observers now look to Google to see how the dominant search vendor will respond to ChatGPT's popularity.

After months of anticipation, Microsoft confirmed on Monday that it plans a multibillion-dollar, multi-year investment in ChatGPT and Dall-E 2 maker OpenAI, putting pressure on archrival and dominant search vendor Google to respond.

Microsoft initially partnered with the research company in 2019 when it invested $1 billion. It later gained exclusive rights to the OpenAI large language model GPT-3 in 2021. The New York Times reported the new investment from Microsoft, revealed a few days after the tech giant laid off 10,000 employees, will be $10 billion.

Microsoft said with the partnership, it will step up development and deployment of specialized supercomputing systems to accelerate OpenAI's independent AI research and development.

The vendor also plans to deploy new OpenAI models across its consumer and enterprise products, including Azure OpenAI Services. Finally, Microsoft plans to power all OpenAI workloads across research, products and API services.

Since OpenAI introduced it in November, ChatGPT -- a large conversational language model capable of writing academic essays and computer code as well as answering limitless queries with seemingly well-informed answers -- rocketed up in popularity around the world, even amid concerns about its accuracy and potential to foster plagiarism.

Microsoft commits to AI

Despite reports from the New York Times and other media outlets citing the $10 billion number, a spokesperson for the tech giant responded to TechTarget's request for comment by saying that "specifics of the financial and deal terms are not being disclosed, and we aren't sharing any more details about this extended partnership beyond what's in the blogs."

Microsoft wants everyone to know that they are heavily into cutting edge AI.
Johna Till JohnsonCEO, analyst, Nemertes

But the splashy development reverberated across a tech industry that has been battered by widespread layoffs in recent months and bolstered Microsoft's message that it's committed to AI.

"Microsoft wants everyone to know that they are heavily into cutting edge AI," said Nemertes CEO and analyst Johna Till Johnson.

Moreover, Microsoft's investment in OpenAI also lets the tech giant take its time in developing AI capabilities and not have to deal as much with the pressure of making products and services profitable quickly, said Forrester Research analyst Will McKeon-White.

Instead of trying to figure what areas of AI need the most development or are most profitable, Microsoft will let OpenAI do much of that, he said.

"Having a neutral third-party organization where this is being run through -- it makes sense to continue funding that," McKeon-White said.

Waiting on Google

With Microsoft's big investment in OpenAI, many are wondering how Google will respond to it and the popularity of ChatGPT itself.

Google is now strategizing ways to outdo ChatGPT, which may be threatening the Google's conception of search. Google Search relies more on search engine optimization as well as ranking media and research reports on topics.

Google parent Alphabet CEO Sundar Pichai recently called in Google founders Larry Page and Sergey Brin to help plan and develop new AI chatbot and an image generation tool, the Times also reported.

"They're very aware that their version of search will get just totaled if somebody else has the ability to deliver AI," Johnson said.

Google did not immediately respond to a request for comment.

However, Google's advantage over Microsoft is that it doesn't need to bring in resources from outside to develop new AI capabilities, Johnson said.

"Microsoft has a long, strong history of buying companies and then either shutting them down or rolling over them, sometimes incorporating capabilities into Microsoft," she said. "Google tends not to do that. They tend to rely more on homegrown stuff."

Google's main problem now is that many of its generative AI products have yet to be released, McKeon-White said.

"They probably have stuff. It's just that it's not quite as ready for primetime, or they're being more conservative with the releases, or they're actively embedding them in other systems," he said.

A bigger AI team

It's also possible that Google might need to boost its AI development team.

Compared to many other types of technologies, AI requires a massive amount of labor, McKeon-White said.

"OpenAI has been very good in expanding their working pool," he said, adding that the company also now able to throw a large amount of money at a specific problem.

In contrast, Google has to spread its funds across all its projects, which span the gamut of enterprise AI and cloud technologies.

"It's really the difference between a very well-funded and very focused, smaller organization and a larger corporation that has to concern itself with the operations of corporations," McKeon-White said.

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