Microsoft Rethinks OpenAI Investment After Altman's Ouster, OpenAI Secures $10B Deal with Oracle
October 19, 2024Microsoft has reevaluated its investment strategy in OpenAI following the controversial ouster of Sam Altman as CEO in November 2023.
As OpenAI transitions from a non-profit to a for-profit model, both Microsoft and OpenAI are working through the complexities of converting Microsoft's previous $13.75 billion investment into equity.
Initially, Microsoft CEO Satya Nadella was open to increasing investment in OpenAI, but his perspective shifted dramatically after Altman's firing, leaving him 'shocked and concerned.'
In light of these developments, OpenAI has been actively seeking additional funding and computing resources, projecting a multi-billion dollar loss for 2024.
Despite these challenges, OpenAI has successfully secured $6.6 billion in funding from various investors, including Nvidia and MGX, along with a $4 billion loan.
However, due to Microsoft's refusal to provide further funding, OpenAI entered into a $10 billion computing deal with Oracle in June 2024.
While Microsoft has remained largely firm on funding, it has offered some reductions in computing costs to support OpenAI.
OpenAI is also in discussions to lease an Oracle data center in Texas, which would significantly enhance its AI computing capabilities.
To navigate this complex transition, Microsoft has enlisted the help of Morgan Stanley, while OpenAI is collaborating with Goldman Sachs.
Sam Altman has publicly acknowledged the critical role of Microsoft's initial investment and resources in driving OpenAI's research advancements.
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