Microsoft
ChatGPT is a natural language processing model which means it can generate text as if it's written by a human. ChatGPT crossed more than 1 million users, five days after it was released by the public.
OpenAI was founded by Sam Altman in 2015. Previously, Altman had been the CEO of yCombinator which is a startup accelerator that has funded and seeded some of the most well-known and successful Silicon Valley unicorns.
In recent months, OpenAI ChatGPT has been making waves on social media for its ability to produce impressive outputs that can vary depending on user prompts. Examples include text in another author's voice or even code.
The deal will value OpenAI at $29 billion. According to reports, Microsoft will get 75% of OpenAI's profits until it recoups its investment. Afterward, it will retain a 49% stake in the company.
For OpenAI, the appeal is easy to understand. While everyone agrees on ChatGPT's massive potential, there's no simple path to monetization other than to charge users. Of course, this would impede user growth and also cut it off from more iterations and more data which will serve to improve the AI.
However, the company is burning through cash rapidly given the intense computing power required for AI. By partnering with cash-rich Microsoft, OpenAI is able to continue funding its growth without having any constraints that would typically come with VC investments.
For Microsoft, the appeal is even easier to understand. Microsoft's Bing is a clear second behind Google
The deal is also somewhat ironic as Microsoft infamously lost to Google in search despite it being exponentially larger with more resources. Now, many believe AI products like ChatGPT are an existential threat to Google's search business, and Microsoft is now funding the upstart, while Google is now the Goliath.
