Microsoft Invests $10 Billion in OpenAI, Valuing ChatGPT Maker at $29 Billion

By Greg Fobbs - CMO, Zenbe

January 10th 2023

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Microsoft is reportedly investing $10 billion in OpenAI, the startup behind the popular natural language processing model ChatGPT, according to a report by Semafor. This deal could boost the company's value to $29 billion and is, according to term sheets circulated to prospective investors, expected to close by the end of 2022.

Upon the completion of the deal, Microsoft will own a 49% stake in OpenAI and will be entitled to a 75% share of all profits generated until the investment has been paid back in full. ChatGPT has become quite a phenomenon since its public launch in late November and is capable of producing text indistinguishable from that of a human. It can be used for a variety of applications, from programming to essay writing, and has given rise to the speculation that it could undermine Google's position as the entry point to the internet.

In December, Morgan Stanley analyst Brian Nowak, who covers Alphabet, argued that language models such as ChatGPT might "disrupt Google's position" and take some of its market share. However, while many are optimistic about the amount of potential ChatGPT has to offer, OpenAI is facing a great financial burden due to the model's immense popularity -- reaching 1 million users just five days after its release. Microsoft's investment could therefore be crucial for OpenAI's future.