Is the Microsoft-OpenAI deal AI’s “iPhone Moment”?

Microsoft and wildly popular ChatGPT-maker OpenAI announced an extended partnership through a multiyear, multibillion-dollar investment, in a press release released on January 23. Announcing the extended partnership, Microsoft CEO Satya Nadella said, “The next major wave of computing is being born, with advances in AI.”

Microsoft declined to disclose the exact investment amount. Still, Semafor reported earlier this month that Microsoft was in talks to invest as much as $10 billion, bringing the total valuation of the AI startup all the way to $29 billion.

ChatGPT is a chatbot launched by OpenAI in November 2022, co-founded by Elon Musk, former Y Combinator president Sam Altman and other tech leaders. Within days of its release, it attracted one million users. It operates on GPT-3, the latest version of OpenAI’s “large language model,” which can answer prompt questions, write poetry and blog posts, as well as create codes for programming. 

The deal marks the third phase of the partnership between OpenAI and Microsoft, which invested $1 billion in the San Francisco-based startup in 2019, followed by an additional $2 billion in 2021, according to industry sources. This renewed partnership aims to accelerate AI developments and help both companies commercialize advanced technologies.

The agreement states that Microsoft would receive 75% of OpenAI’s profits until its investment is recouped. When that happens, ownership would be split 49% for Microsoft, 49% for other investors, and 2% for OpenAI’s non-profit parent. Once the deal is fully paid, the OpenAI nonprofit takes over 100% of profit distribution.

It might seem unreasonable to give up 100% of profits at the end of the deal, but for Microsoft, this partnership is not a short-term play for profits. Since their first partnership in 2019, Microsoft has been aiming to become a new player in the cloud computing space along with Amazon and Google. According to estimates made by Fortune, even if OpenAI doubles its net profit annually, it will take a decade for Microsoft to be paid off and OpenAI to regain independence. 

While OpenAI is making a breakthrough in artificial intelligence technology, it’s better to view the deal as Microsoft’s bet on generative AI technology, which has the potential to revolutionize internet access and task performance with AI-powered digital assistants. OpenAI may also become the first company to develop computers capable of thinking and learning, a development deemed “the most important technological achievement in human history” by OpenAI CEO Sam Altman.

Microsoft has already begun incorporating OpenAI technology into its existing products and services. OpenAI started working on DALL-E, a tool that lets users generate realistic images by simply describing what they want to see. Last year, Microsoft integrated DALL-E into its Bing search engine and is working with OpenAI on a new version of the search engine that will include technology similar to ChatGPT, according to The Information.

Meanwhile, Microsoft-owned popular online programming service, GitHub, introduced a tool called Copilot, that assists programmers as they write code. It works similarly to autocomplete tools by suggesting the following line of code as the programmer types. 

This shows that Microsoft sees these technologies as a way to enhance and add to its existing products for businesses, software developers, and consumers while increasing profits for its Azure cloud computing services. Microsoft has stated its goal to make Azure the AI supercomputer for the entire world. As per their renewed partnership, Microsoft Azure will continue to be OpenAI’s exclusive cloud provider, “Azure will power all OpenAI workloads across research, products, and API services.”

Although it’s a huge step for Microsoft towards AI advancements, it’s worth mentioning that this unique partnership with ChatGPT comes just a week after Microsoft announced that they would lay off 10,000 employees globally. According to an email sent to employees by CEO Satya Nadella, those cuts were necessary due to the increasing adoption of AI and the slowdown in enterprise spending caused by economic uncertainty. Nadella stated that Microsoft will continue investing in “strategic areas for our future,” which he believes will be “the next major wave” of computing, suggesting automation and AI will reduce the company’s need for human headcount. 

“We need something that truly changes the productivity curve so we can have real economic growth,” he said during a recent Wall Street Journal panel. 

The integration of AI into our lives is causing many to wonder what the future holds for employment, especially with recent layoffs from big tech companies. As late French theorist Paul Virilio said, “When you invent the ship, you also invent the shipwreck; when you invent the plane you also invent the plane crash;…Every technology carries its own negativity, which is invented at the same time as technical progress.“ The same holds true for new technologies –  when new technology is introduced, it displaces an older one, and eliminates certain jobs. When iPhone was first introduced to the world in 2007, it completely disrupted the way we interact with technology, with its built-in iPod and iTunes, we no longer use MP3 players; its internet connectivity and built-in web browser have made it easier for people to access news and other information online, contributing to the decline of print media such as newspapers and magazines. But at the same time, it gave rise to new app developers, internet stars, e-commerce experts, mobile device repair technicians, and online publications. 

Similarly, the progress in AI will create new job prospects. In its recent Future of Jobs Report, the World Economic Forum estimated that AI will replace around 85 million jobs by 2025 and also create 97 million new jobs in the same time frame. The healthcare industry is expected to see the most significant benefits, with AI-assisted healthcare technicians experiencing growth. The demand will grow for jobs such as machine learning engineers, robotics engineers, and data scientists, there will also be a rise in demand for less-skilled jobs such as AI maintenance. 

Not surprisingly, the idea that machines may think like humans causes a mix of hope and fear. Some hope that people will no longer have to do routine jobs and can instead focus on meaningful work, while others fear complete replacement by robots. The reality likely falls somewhere in between these two extremes, making only one thing certain – AI will impact not only the workplace but all aspects of our lives, and it is up to us to recognize this and think about what makes us different from AI and, therefore, irreplaceable. 

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