AI Power Struggle: Microsoft vs Google

On July 22, 2019, Microsoft made a $1 billion investment into OpenAI, a startup that its CEO, Satya Nadella, hoped would “democratize AI — while always keeping AI safety front and center — so everyone can benefit.” OpenAI partnered with Microsoft, according to Fortune Magazine, to invest in costly development and build its technologies on Microsoft Azure. The partnership aimed to focus on Artificial General Intelligence, which allows computers to learn new skills and handle diverse tasks like humans. This is in contrast to existing AI, which can only learn specific jobs like understanding images and is unable to solve different problems on its own.

One of the fruits of the partnership was unleashed on November 30, 2022, the ChatGPT chatbot, which took the internet by storm with its human-like conversation based on user prompts and its ability to respond to a large range of questions while imitating human speaking styles. Another fruit of the partnership is DALL-E-2, an AI system that can create realistic images and art from a description in natural language. While ChatGPT is currently free to use, DALL-E-2 has you allotted 50 free credits during your first month’s use and 15 free credits after that. You have to use them to appreciate their wonders.

Considering the products’ meteoric rise in the minds of consumers, Microsoft looks set to go all-in. Already, Microsoft wants to integrate the ChatGPT technology into its flagging Bing search engine and suite of software tools, including Microsoft Word and Outlook. Even more, Microsoft is getting ready to bet the farm on artificial intelligence. Microsoft officials are preparing to invest as much as $10 billion in OpenAI. If completed, the deal would be Microsoft’s third-largest financial commitment, after only its acquisitions of LinkedIn and Nuance. (The Activision Blizzard purchase is pending regulatory approval.)

With the plan to resuscitate the Bing search engine, it would make the competition between Microsoft and Google interesting again. At the moment, Google has dominated the market with its A.I.-powered engine, taking more than 90% of search market share. (Bing has 3%.) Its AI subsidiary, DeepMind, boasts some of the deepest pockets in the industry, spending $3.8 billion between 2017 and 2021. Alphabet, Google’s parent company, is also deep into the development of large-language models similar to ChatGPT.

The story went that when ChatGPT was released and caught fire with the most technologically-inclined minds on the internet, Google CEO Sundar Pichai raised an alarm within the company. In a memo and audio recording obtained by the Times, the publication says Pichai has been in meetings to “define Google’s AI strategy” and has “upended the work of numerous groups inside the company to respond to the threat that ChatGPT poses.” For the time being, CNBC reported that company executives are keeping their own ChatGPT-like product under wraps because they consider the reputational costs of any product issues outweighing the benefits of a public release.

On its part, OpenAI is not taking in the applause. It is profoundly aware of the challenges ahead. Even with the current ChatGPT tool, there are issues: It is still buggy, prone to errors, and out-of-date (its knowledge base doesn’t extend beyond 2021). CEO Sam Altman has admitted as much, tweeting last month that ChatGPT is “incredibly limited, but good enough at some things to create a misleading impression of greatness.”

But the potential is immense, even financially. OpenAI only generated roughly $35 million in revenue in 2022, but it forecasts sales of $1 billion by 2024. Microsoft is banking on that. Experts believe Microsoft’s connection with OpenAI is a “once-in-a-decade opportunity to unseat Google’s search dominance.”

Google, through Alphabet, would surely not fold its arms in this game, and that means that the next several years will separate the wheat from the generative AI chaff.

One thing is certain: Consumers will gleefully watch while they hope regulatory powers will adapt to protect them from the downsides.



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