On Monday, Microsoft (MSFT  ) announced that it will be extending its partnership with tech start-up OpenAI through a "multiyear, multibillion dollar investment" in AI development. The specifics of the investment were not included, but a New York Times source familiar with the deal said Microsoft would be making a $10 billion investment in OpenAI, confirming prior speculation.

"We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform," Microsoft Chairman and CEO, Satya Nadella, is quoted in the company's announcement. "In this next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models, and toolchain with Azure to build and run their applications."

In 2019 and 2021, Microsoft invested a total of $3 billion in OpenAI, helping to fund the development of the start-up's viral AI-powered tools, Dall-E image generator and the chatbot ChatGPT. Last week, the company announced that it would be introducing a paid version of its chatbot, which was seen as an attempt to get Microsoft to agree to the $10 billion investment.

Along with its high-dollar investments, Microsoft has also announced layoffs as a part of its plan to prioritize AI advancement. On January 18, Nadella sent an email to employees informing them of plans to cut 10,000 positions at the company in an effort to "align our cost structure with our revenue and where we see customer demand." Nadella said that hiring would continue "in key strategic areas", noting that AI represents "the next major wave of computing".

Microsoft's focus on AI development is the key to its strategy for staying competitive with other tech giants, like Google (GOOGL  ), Meta Platforms (META  ), and Apple (AAPL  ). In December, Google's CEO Sundar Pichai said that the release of ChatGPT was a "code red" for the company, which immediately pivoted to commit more effort into advancing its own AI technology.

While tools like those created by OpenAI are unquestionably impressive, they aren't perfect. AI systems build responses based on data sets provided by the developers, and these data sets often reflect biases and toxicity seen across the rest of the internet. As a result, the tools can generate responses that include racial and gender bias, misinformation, hate speech, and other harmful messaging.