
Microsoft has been the most prominent investor in OpenAI, helping the ChatGPT developer further its efforts in the burgeoning and potentially lucrative land of AI. In return, ChatGPT and the GPT model have been integrated into several Microsoft products and services to grace them with AI-powered abilities. Toward that end, the two companies have forged a symbiotic connection that benefits both.
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In Microsoft's latest annual report as spotted by CNBC, the company pointed out that it has a long-term partnership with OpenAI and uses OpenAI's models in various consumer and enterprise products.
Microsoft and OpenAI also compete with each other in several key sectors. In its annual report, Microsoft directly cited OpenAI (as well as other companies) as a competitor, particularly in search and news advertising.
Does this point to a potentially dysfunctional and disruptive kink in their connection? Not at all. As Michael Corleone memorably said in The Godfather: "It's not personal, it's strictly business."
Indeed, coopetition is a term often used to describe companies that work together as partners but also compete with each other. In that regard, the relationship between Microsoft and OpenAI is nothing unusual, but it is interesting to examine.
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"We have a long-term partnership with OpenAI, a leading AI research and deployment company," Microsoft said toward the beginning of its annual report. "We deploy OpenAI's models across our consumer and enterprise products. As OpenAI's exclusive cloud provider, Azure powers all of OpenAI's workloads. We have also increased our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI's research."
Microsoft has actually been partnering with and investing in OpenAI since 2019 before ChatGPT shook up the world. That year, Microsoft poured $1 billion into the company, with an additional $2 billion in the following years. The biggest investment kicked off in January 2023 when Microsoft promised to pony up a reported $10 billion over multiple years.
Further down in the report, however, Microsoft acknowledged the rivalry between it and OpenAI and other partners.
"Our AI offerings compete with AI products from hyper scalers such as Amazon and Google, as well as products from other emerging competitors, including Anthropic, OpenAI, Meta, and other open source offerings, many of which are also current or potential partners," Microsoft said.
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Getting more specific in the report, Microsoft pointed out that its "search and news advertising business competes with Google, OpenAI, and a wide array of websites, social platforms like Meta, and portals that provide content and online offerings to end users."
Nevertheless, Microsoft's Copilot AI is powered by ChatGPT, despite the two AIs also competing with one another. As dedicated websites and mobile apps, both work similarly. Ask the bot to answer a question, research information, or create content, and hopefully provide what you need. Both offer paid subscriptions with more advanced features. But naturally, each company would prefer you use its respective service.
This week, OpenAI upped its ante by introducing its own search engine. Known as SearchGPT, the new AI-equipped service can engage with you in a conversation with real-time information grabbed from the web. SearchGPT is still in testing mode and available only to a small group of people. But if this new search engine takes off, OpenAI could rival or surpass Microsoft's Bing search, which holds only a 3.7% slice of the market, according to StatCounter.
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Search is one of the top drivers of revenue for companies like Microsoft. In its annual report, Microsoft said that revenue for search and news advertising hit $12.6 million in 2024, a gain of 3% from last year. Though the company makes more money from Windows and its Office customer and server products, search is still an important area for Microsoft.
Responding to questions about OpenAI's relationship with Microsoft, an OpenAI spokesperson told CNBC that nothing has changed between the two, and their partnership was established with the understanding that they would often compete.