Microsoft eyes $10 billion bet on ChatGPT

Microsoft is reportedly in talks to invest $10 billion in OpenAI, the company behind the widely popular ChatGPT app, according to sources familiar with the matter. The investment, which is also set to include other venture firms, would value OpenAI at $29 billion, including the new investment. It is not yet confirmed if the deal has been finalized, but documents sent to prospective investors in recent weeks suggest that the targeted close date for the deal is by the end of 2022.

The investment would be part of a complex deal in which Microsoft would receive 75% of OpenAI’s profits until it recoups its investment. After that point, the structure would revert to reflect ownership of OpenAI, with Microsoft having a 49% stake, other investors having another 49%, and OpenAI’s nonprofit parent having 2%. There is also a profit cap that varies for each set of investors, which is unusual for venture deals. The terms of the deal and the investment amount could change, and the deal may fall apart.

Both Microsoft and OpenAI have declined to comment on the reports. It was previously reported by The Wall Street Journal that ChatGPT was allowing employees and early investors to sell their shares at a valuation of $29 billion. In October, The Information reported that Microsoft, which had previously invested $1 billion in cash and cloud credits into OpenAI in 2019, was in talks to increase its stake in the company. The proposed $10 billion investment would significantly expand Microsoft’s involvement with OpenAI, and the company’s interest in using AI and machine learning technology for their products. The sources also noted that it is unclear if the deal has been finalized and the terms and investment amount are subject to change.

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