The Cold war was the era of inventions. Reliable transistors, chips, solid-state storage, mass-produced programmable computers and other major inventions that authored the future of technology happened between 1950 and 1990. The fight between the two countries ends up taking the artificial satellite (Sputnik) to space and the first man to the moon. 

Fast forward to 2023, the race for artificial intelligence dominance bears striking semblance to the ‘Cold War Era’ but with Google and Microsoft locking horns to fight the AI battle. 

AI War Just Got Real

When Microsoft invested $1 billion in OpenAI in 2019, everybody sensed that something was cooking. The initial investment in OpenAI allowed the platform to build two amazing products—CODEX and DALL-E. This emboldened Microsoft to increase its investment by putting in another $10 billion in the viral ChatGPT creator, OpenAI. 

Meanwhile, Google—slightly threatened by the partnership—issued ‘code red’ and its founders, Larry Page and Sergey Brin, made a surprise entry to work on making the search engine better. Soon, Google made a $300 million investment in AI safety and research company Anthropic, founded by Dario Amodei, ex-VP of research at OpenAI, along with his sister Daniela and nine other former OpenAI employees, in 2021.

The deal is likely to have taken Anthropic’s valuation to about $5 billion, with Google occupying an estimated 10% stake while Microsoft is set to own 49% of OpenAI—almost five times more than Google. Microsoft has already added ChatGPT to Teams and is also preparing to add it as well as GPT-4 to its search engine ‘Bing’ very soon, which otherwise falls fairly short compared to Google Search. 

However, not all is bleak because Google has a lot in store that it is revealing slowly. Yesterday, the tech giant unveiled ChatGPT’s rival Bard, its conversational AI chatbot, based on Google’s LaMDA (Language Model for Dialogue Applications). It’s the same AI model, which had purportedly turned sentient and Google had to shut it down. 

Besides, the recent investment in Anthropic will also allow Google to use its language model assistant, Claude, for enterprises. Google’s DeepMind’s in-house AI chatbot, Sparrow, is also being fine-tuned simultaneously. 

Riled up by the fire of competition, the big techs are even hosting events at the same time. Google’s ‘Live from Paris’ event will be held on February 8, 2023, along with Microsoft–OpenAI’s surprise event to “share some progress on a few exciting projects” today. Microsoft announced this event minutes after Bard’s announcement. 

Big Tech, Big Risks

The tech giants often acquire a host of startups to minimise the risk of new competitors emerging and potentially disrupting their dominant position in the market. Over the years, Microsoft has invested in GitHub, LinkedIn, Skype and more. Similarly, Google also has DeepMind, Verily, Nest, Waymo and, most recently, Anthropic. Google has recently moved DeepMind to its major development department while the rest remained in the Other Bets.

The acquisition of startups by larger firms serves as a strategic buffer, allowing them to deflect blame and avoid public backlash in the event of a failure or misstep. 

For instance, when Anthony Levandowski, one the prominent engineers of autonomous vehicles, was asked to build the self-driving car for Discovery Channel, Google was supportive of the idea but wanted to keep its name separate from the project due to reputational concerns over the potential risk of a crash. Levandowski then created a new company, Anthony’s Robots, which quickly built the ‘Pribot’, a self-driving Toyota Prius that was the first to drive on public roads. Impressed with the Pribot, Google’s founders provided Levandowski with the funds to bring it into a discrete unit within Google called ‘X’, which is a part of Other Bets. 

Ultimately, Google acquired both of Levandowski’s companies, Anthony’s Robots and 510 Systems. During the earnings report, Alphabet files for Other Bets separately. 

Addressing the increasing popularity of ChatGPT, Google executives have previously stated that its AI models are on par with OpenAI’s. Still, due to the “reputational risk” created by the technology, it is acting “more conservatively than a small startup”.

Meanwhile, Google’s latest fetch Anthropic has an interesting back story. Former OpenAI employee, Amodei, stepped down from the company due to disagreement with its commercialising direction accelerated by Microsoft’s investment. Ironically, Anthropic, now backed by Google, is pursuing a similar path.

AI Wins the Race

As the AI race heats up, it has moved beyond building something new and groundbreaking. Instead, it’s about who can execute and perfect the existing models better—and, in this battle, no one is holding back. 

However, unlike Google, Microsoft is not taking it slow. The company is all-in, leaving no room for complacency. With both tech giants relying on existing models, the competition has become personal and the stakes couldn’t be any higher. More will be unveiled after today’s events. 

It’s no longer just about technical capabilities; it’s about who will emerge as the ultimate AI champion and take the trophy home.

The AI arms race just got real.