The OpenAI logo displayed on a phone screen and the ChatGPT website displayed on a laptop screen are seen in an illustrative photo taken in Krakow, Poland on December 5, 2022.
Jakub Porzycki Nurphoto Getty Images
Microsoft plans to invest $10 billion in OpenAI, the startup behind the popular artificial intelligence tool ChatGPT, according to a report from Semafor.
The deal is part of a funding round with other investors that will value OpenAI at $29 billion, Semafor reported Tuesday, citing people familiar with the matter.
It is unclear whether the deal has been finalized but a term sheet sent to potential investors indicates plans to close the deal by the end of 2022, Semafor reported.
Microsoft will reportedly get a 75% share of OpenAI’s profits until it returns money for the investment, after which the company will assume a 49% stake in OpenAI.
Microsoft and OpenAI were not immediately available for comment when contacted by CNBC.
For weeks, the tech world has been abuzz with chatter about ChatGPT. The tool is a natural language processing model, meaning it’s designed to produce text that looks like a human writing it.
The AI model, itself a variant of the GPT-3 family of large language models, has been used for everything from developing code to writing college essays.
A bet on ChatGPT could help Microsoft boost its efforts in web search, a market it dominates Google. The company’s Bing browser only has a small share of the global search engine market, but it hopes the deal will help the company break away from Google’s dominance by offering more advanced search capabilities.
In December, Morgan Stanley published a report examining whether ChatGPT is a threat to Google. Brian Nowak, the bank’s principal analyst at Alphabet, wrote that the language model could take market share “and disrupt Google’s position as an entry point for people on the Internet.”
OpenAI, founded by Silicon Valley entrepreneur Sam Altman in 2015, launched ChatGPT to the public in late November. Despite optimism about its potential, the project burned through cash due to the overwhelming level of pressure on its servers due to the virus. Five days after OpenAI released ChatGPT, Altman said if the chat research tool crosses 1 million users.
Read the full report on the Semafor website.