Making Billions From ChatGPT
Chat GPT is not even two months old, but it has already sent shocks throughout the tech world, As it broke over 1 million users in just one week. And it’s set to completely change how we use technology.
It looks like open AI The makers of ChatGPT are on top of the world right now, but behind all this, another company you know very well has been waiting for this moment for years as this will make them the real winners of the battle for AI and the billions of dollars that are at stake.
Microsoft has been pulling the strings behind the scenes for years now and here about to announce a genius $10 billion deal with OpenAI that might end up being the tech deal of the century. Making Billions From ChatGPT
And if they succeed, they will live in the dust. Companies like Google, the guys that basically invented the tech behind artificial intelligence.
speaking of Google, this is the very first time that anyone has a real chance of defrauding them as the kings of search.
There are three main reasons why Microsoft is going from a boring company making spreadsheet software to running the world, changing AI that will come in next years. And ChatGPT is just a small piece of this puzzle.
In 2019, Microsoft CEO Satya Nadella decided to invest 1 billion in open ai, which at the time was just a small AI research laboratory, but things like ChatGPT or AI generated art was still considered science fiction.
No one could have predicted that in just three years we would reach the point where we are today where the school system is scrambling to understand how to face AI. Making Billions From ChatGPT
But these kind of technologies follow what is called hockey stick growth, where you see very small increments for years, which then compound and explode in a very short time. And this is what’s happening now.
But the genius part of the deal that Microsoft made with open AI in 2019 was that part of that $1 billion that Microsoft paid was in cloud credits.
And this is the key to everything. To understand how important this is, you have to understand that the biggest cost of operating and running an AI model is the insane amount of computing power it requires.
And it’s no surprise that this is the largest expense that any AI company has. And guess who’s the second largest supplier of clouds computing in the world? That’s right. Making Billions From ChatGPT
I think some of you are starting to get why this move was so genius.
Basically Microsoft said, Hey, I’m gonna give you all this money to take a piece of your cool company, but I also know that your biggest expense will be computing power and guess who’s gonna provide you that? Also me.
So basically Microsoft was giving money to open AI to pay back Microsoft. This investment basically sets Microsoft on an exclusive partnership with open AI and them being closer and closer of the years.
And if you think this was an op move, just wait until you hear what they are planning. Now, just a few days ago it was announced that Microsoft and open AI are reportedly working on a $10 billion deal.
And if this goes through, it can very well be the single most genius tech deal in the history of tech because Microsoft is reported in giving open AI 10 billion to get to on 49% of the whole company. Making Billions From ChatGPT
And not only that, open AI will need to give Microsoft back 75% of their profits until they pay back the 10 billion.
But then again, where is open AI gonna spend all this money? Well, for the most part, you guessed it on Microsoft computing power.
So why the hell would open AI agree to this? Well, first of all, it’s gonna make their employees and founders a ton of money.
But the other more important reason is that while chat GPT is the hottest thing in tech, it’s burning cash at an incredible rate.
Just to let you play with building rhymes on ChatGPT Open AI is spending $3 million in cloud computing every single day, add everything up, and they’re likely to spend one to $3 billion in cloud computing alone in next year.
This is already a killer deal for Microsoft and can already crown Satya Nadella as a genius. Making Billions From ChatGPT
But it doesn’t end here because the real plan hiding behind is that Microsoft and open AI wanna build the foundations of artificial intelligence on which everyone else will build on.
Imagine these as kind of a tower Chat GPT which has been sending the word in a frenzy is just a front-end application, just a phase for the key ingredient, which is the trained AI model.
In the case of chat GPT, it’s a chat-based adaptation of a model called GPT 3.5, which stands for generative pre-trained transformer, which is also a very cool name for an indie pop-rock band.
And to make this all work, what you need is computing power, which in the case of open AI is kindly provided by Microsoft at the bottom of the tower.
Since creating a new AI model from scratch is extremely expensive, many companies just prefer to pay open AI to use their existing models like GPT free through APIs. Making Billions From ChatGPT
For example, the new AI writing features in notion is powered by GPT, and so it indirectly runs on Microsoft servers now expend this to thousands of companies and millions of AI interactions every single day.
And this translates to billions of dollars in revenue for both open AI and Microsoft. But if this wasn’t enough for the first time in history, they get a once-in-a-lifetime ticket to challenge the dominion of the number one search engine.
As soon as people started to play around with Chat GPT, the first fault was that it’s gonna be the next Google killer.
Now Google is already dying. And Microsoft did not waste time. They’ve already started integrating Chat GPT into their search engine B.
Now, let’s be clear here. Up until today, Bing has been basically a carbon copy of Google, same layout, same principles, same everything.
And they built their 9% market share simply by being the default browser on Windows. So their main contribution up until today was good memes.
But this was not only in vain because now that they have a seat at a table of search engines, they actually have a chance of bringing real innovation something that didn’t happen for 20 years. Making Billions From ChatGPT
But simply throwing in Chat GPT into Bing is not possible. There are some key things that Microsoft needs to think about. First is bias and lawsuits.
There are already counsel as examples of how chat GPT and other AI models like Dolly produce results that may be racist or offensive or dangerous as AI system are only as good as data that used to train them. So as as assured there will be flaws in the model.
For example, if you ask Bing to recap the news of the day, surely some journalists will wonder if their article was scraped by the AI to produce the results.
And this is a legal show waiting to happen. And don’t forget that Microsoft already tried to release an AI chat but a few years ago, but it had to shut it down almost immediately because it got extra races than inappropriate.
And now we have economics. The big problem of AI system as right now is that they’re extremely expensive. A single response from Chat GPT cost a few cents in computational power, which is over a hundred times more than a traditional Google search. Making Billions From ChatGPT
And both Google and Bank today make money on what is called pay per click, where advertisers pay the search engine some amount of money for which click they generate.
But if an AI search engine will provide you the answer rather than a list of links on a page, this simply cannot happen.
One way Microsoft can solve this is to build the first premium search engine where you pay up monthly fee to access something that is just radically better.
So now one question remains, why hasn’t Google done anything about this? They’ve always been at the forefront of ai, but they haven’t released any meaningful product based on AI that had an impact even remotely close to chat GPT or Dolly two.
And that’s because, yeah, Google could go ahead and revamp their whole search experience with ai, but they have simply too much to lose.
58% of Googles revenue is made up of Google search, so taking this risk might end up being disasters for them. But for Microsoft’s, on the other hand, Bing represents only 5% of our revenues. So their downside is limited, but the potential upside is incredibly high. Making Billions From ChatGPT
So everything seems to be falling in the right place for Microsoft Master plan to take over the infrastructure of AI in the coming decade.
But there is one thing that needs to happen for all of this to become a reality, and that is that models like GPT free stay defensible meaning that another company cannot replicate them easily because if this happens, every company will just build their own AI models instead of going to Microsoft.
Nowadays, most of the AI applications that we are seeing are based somehow on infrastructure models like GPT, but we simply don’t know if this will continue to be the trend in the future.
2023 will be an incredibly interesting year for ai and for me, the coolest thing is that finally, 20 years later, Microsoft might have found a way to make a good version of clip.