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Windows Central

Technology

Kevin Okemwa

An analyst predicts OpenAI could be part of Microsoft's acquisition portfolio by 2027: "Investors' focus might shift away from AI, and the startups will just find it difficult to keep funding for the innovation they want to do"

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What you need to know

Microsoft might buy OpenAI within the next three years.
An analyst predicts the AI hype is fading, prompting investors to lose interest in the technology and channel their funds elsewhere.
As investors lose interest in AI, startups like OpenAI and Anthropic might be forced into acquisitions featuring investors with deep pockets like Microsoft.

According to Forbes, Microsoft might acquire the ChatGPT maker within the next three years.

While speaking to Forbes, chief analyst at CCS Insight Ben Wood indicated:

"We think there's going to be a bit of a correction in the AI space because the hype starts to blow out of it."

Though it remains debatable whether AI is a fad or will stand the test of time, the analyst's predictions indicate that the hype around AI is quickly fading away. Consequently, AI startups like OpenAI and Anthropic will be forced into unceremonious acquisitions by investors with vast resources, with Microsoft and Amazon at the top of that list.

According to Wood:

"AI firms are going to start questioning whether it makes sense for them to carry on, but they're also going to need a lot of money because investors' focus might shift away from that [AI], and the startups will just find it difficult to keep funding for the innovation that they want to do."

While the analyst acknowledges that investors are still deeply interested and invested in AI innovation based on OpenAI's latest funding round, he claims the situation could quickly change over the next few years.

Wood views Microsoft as a potential OpenAI buyer because its Copilot AI chatbot relies on the ChatGPT maker's technology. "It might be that Microsoft sees that there's a strategic importance in owning OpenAI outright and keeping complete control of how the business shapes up in the future," the analyst added.

As you might remember, Microsoft subtly showed interest in investing in AI during Sam Altman's ousting as OpenAI CEO. The tech giant reportedly extended an offer to Sam Altman and Greg Brockman to head its then-new AI division domiciled at its LinkedIn office in San Fransico. While Microsoft forged forward with these plans with DeepMind and Inflection co-founder Mustafa Suleyman at the helm, the analyst's predictions aren't a reach.

"The vast amounts of money that's required to keep these AI services going, and the fact that you need to keep a competitive edge at a time when it's getting more and more competitive, we think that may well encourage the leading stakeholders to get more actively involved," Wood concluded.

OpenAI-owned Microsoft?

Microsoft and OpenAI undoubtedly have a complicated relationship at best, despite the former's multi-billion dollar investment in the ChatGPT maker's technology. The tech giant has gone on to integrate AI technology across its tech stack. Microsoft currently holds a 49% stake in the earnings of OpenAI's for-profit arm.

Earlier this year, the tech firm briefly became the world's most valuable company ahead of Apple with over $3 trillion in market capitalization, prompting 13 market analysts to unanimously vote that Microsoft will be the world's most valuable company ahead of Apple in the next five years. Some indicate it's on the verge of reaching its next 'iPhone moment' with AI.

Microsoft's relationship with OpenAI has raised concern among investors. A report claimed that Microsoft insiders feel the company has seemingly become "a glorified IT department for the hot startup." However, Microsoft CEO Satya Nadella seems to be of a different opinion, indicating:

"OpenAI wouldn't have existed but for our early support. Today, they are an incredible company, and we are thrilled to be a part of their journey."

Microsoft and OpenAI's complicated partnership has attracted antitrust scrutiny. However, it was quickly established that Microsoft's multi-billion dollar investment wasn't a hostile takeover of OpenAI and had no say in the ChatGPT maker's decisions.

Recently, OpenAI was reportedly on the verge of bankruptcy, with projections of making a $5 billion loss within the next few months. However, Microsoft, NVIDIA, Thrive Capital, and other investors raised $6.6 billion in round funding, extending the ChatGPT maker's lifeline and pushing its market valuation well beyond $157 billion. Apple wiggled out of the round of funding at the eleventh hour for unspecified reasons, potentially indicating that it could be trying to establish its path in the AI space centered on privacy and security.

Despite the bankruptcy threats, OpenAI is inspiring confidence in investors, who claim the AI firm could become the world's dominant AI company worth trillions of dollars.

Be that as it may, OpenAI still has a mountain to climb before its operations run smoothly. For instance, a recent report suggests that OpenAI may have to return the $6.6 billion it raised to its investors if it's unable to become a for-profit entity within the next two years.

Market analysts and experts predict OpenAI will have difficulty getting its staff, board of directors, regulators, and the government to sign off on the proposal. This issue could ultimately place the ChatGPT maker in a hamster's wheel, chasing funding from investors and leaving the AI crown up for grabs to competitors like Microsoft, Anthropic, Google, and more.

These concerns could explain why OpenAI is reportedly gearing up to raise subscription prices for its next-gen models to $2,000 per month.

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