Microsoft Raises the Stakes on OpenAI, to Invest Additional $10 Bn

Basking in the success of Codex, DALL.E and ChatGPT, Microsoft is now looking at pumping an additional $10 billion in OpenAI, a huge leap from its initial $1 billion investment in the company in 2019. 

The investment, which will also include other venture firms, is expected to value OpenAI at $29 billion. In 2019, Microsoft backed OpenAI with an investment of $1 billion in its cash and cloud credits. It is most likely also in the process of strengthening its search engine Bing by adding ChatGPT, alongside other enterprise applications and tools. 

Less than a week ago, the AI research lab announced that it is selling its existing shares at a record-high valuation of $29 billion. The acquisition of OpenAI's existing shares, including those held by its employees, is being negotiated by investment firms like Founders Fund and Thrive Capital.

According to sources, Microsoft's funding would be a part of a complicated agreement under which the firm would receive 75% of OpenAI's profits until it redeems its investment. Once that sum is achieved, the ownership structure would switch to Microsoft owning 49%, other investors claiming another 49%, and the rest 2% will be for OpenAI's nonprofit parent. Additionally, there is a profit cap that differs for each group of investors, which is rare for venture deals where investors want to make a 20–30% return on their investment. The deal can be dissolved if the conditions or the investment amount alter.

Read more: Google, Meta, Why NO ChatGPT? 

In December 2022, Microsoft entered a ten-year agreement with the London Stock Exchange Group (LSEG) and purchased nearly a 4% share in the company in exchange for providing new data infrastructure, analytics, modelling solutions, and cloud computing technologies. Microsoft reported revenues of about $198 billion in 2017, an increase of 18% over the previous year, and an operating income of $83 billion. Its net income soared by 19% yearly to $72.7 billion.