OpenAI and Microsoft – partners, competitors, or both?

Microsoft has been essentially the most outstanding investor in OpenAI, serving to the ChatGPT developer additional its efforts within the burgeoning and probably profitable land of AI. In return, ChatGPT and the GPT mannequin have been built-in into a number of Microsoft services and products to grace them with AI-powered talents. Towards that finish, the 2 firms have solid a symbiotic connection that advantages each.

In Microsoft’s newest annual report as noticed by CNBC, the corporate identified that it has a long-term partnership with OpenAI and makes use of OpenAI’s fashions in varied client and enterprise merchandise.

Microsoft and OpenAI additionally compete with one another in a number of key sectors. In its annual report, Microsoft immediately cited OpenAI (in addition to different firms) as a competitor, significantly in search and information promoting.

Does this level to a probably dysfunctional and disruptive kink of their connection? By no means. As Michael Corleone memorably stated in The Godfather: “It isn’t private, it is strictly enterprise.”

Certainly, coopetition is a time period usually used to explain firms that work collectively as companions but additionally compete with one another. In that regard, the connection between Microsoft and OpenAI is nothing uncommon, however it’s fascinating to look at.

“We’ve a long-term partnership with OpenAI, a number one AI analysis and deployment firm,” Microsoft stated towards the start of its annual report. “We deploy OpenAI’s fashions throughout our client and enterprise merchandise. As OpenAI’s unique cloud supplier, Azure powers all of OpenAI’s workloads. We’ve additionally elevated our investments within the growth and deployment of specialised supercomputing techniques to speed up OpenAI’s analysis.”

Microsoft has truly been partnering with and investing in OpenAI since 2019 earlier than ChatGPT shook up the world. That yr, Microsoft poured $1 billion into the corporate, with a further $2 billion within the following years. The largest funding kicked off in January 2023 when Microsoft promised to pony up a reported $10 billion over a number of years.

Additional down within the report, nonetheless, Microsoft acknowledged the rivalry between it and OpenAI and different companions.

“Our AI choices compete with AI merchandise from hyper scalers similar to Amazon and Google, in addition to merchandise from different rising opponents, together with Anthropic, OpenAI, Meta, and different open supply choices, a lot of that are additionally present or potential companions,” Microsoft stated.

Getting extra particular within the report, Microsoft identified that its “search and information promoting enterprise competes with Google, OpenAI, and a wide selection of internet sites, social platforms like Meta, and portals that present content material and on-line choices to finish customers.”

Nonetheless, Microsoft’s Copilot AI is powered by ChatGPT, regardless of the 2 AIs additionally competing with one one other. As devoted web sites and cell apps, each work equally. Ask the bot to reply a query, analysis info, or create content material, and hopefully present what you want. Each provide paid subscriptions with extra superior options. However naturally, every firm would favor you utilize its respective service.

This week, OpenAI upped its ante by introducing its personal search engine. Generally known as SearchGPT, the brand new AI-equipped service can have interaction with you in a dialog with real-time info grabbed from the net. SearchGPT continues to be in testing mode and out there solely to a small group of individuals. But when this new search engine takes off, OpenAI may rival or surpass Microsoft’s Bing search, which holds solely a 3.7% slice of the market, in line with StatCounter.

Search is likely one of the prime drivers of income for firms like Microsoft. In its annual report, Microsoft stated that income for search and information promoting hit $12.6 million in 2024, a acquire of three% from final yr. Although the corporate makes extra money from Home windows and its Workplace buyer and server merchandise, search continues to be an necessary space for Microsoft.

Responding to questions on OpenAI’s relationship with Microsoft, an OpenAI spokesperson instructed CNBC that nothing has modified between the 2, and their partnership was established with the understanding that they’d usually compete.