When Microsoft first invested $1 billion in OpenAI in 2019, the deal received no more attention than your average corporate venture round. The startup market was blazing hot, and artificial intelligence was one of many areas attracting mega-valuations, alongside electric vehicles, advanced logistics and aerospace.
Three years later, the market looks very different.
Startup funding has cratered following the collapse of public market multiples for high-growth, money-losing tech companies. The exception is artificial intelligence, specifically generative AI, which refers to technologies focused on producing automated text, visual and audio responses.
No private company is hotter than OpenAI. In November, the San Francisco-based startup introduced ChatGPT, a chatbot that went viral thanks to its ability to craft human-like replies to users’ queries about nearly any topic.
Microsoft’s once under-the-radar investment is now a major topic of discussion, both in venture circles and among public shareholders, who are trying to figure out what it means to the potential value of their stock. Microsoft’s cumulative investment in OpenAI has reportedly swelled to $13 billion and the startup’s valuation has hit roughly $29 billion.