Morgan Stanley Assesses Fluid Impact of OpenAI on Microsoft

The business relationship between Microsoft and OpenAI remains dynamic, according to recent analysis by Morgan Stanley. The ever-changing nature of this partnership underlines both the potential benefits and uncertainties that lay ahead for the tech conglomerate.

Microsoft, the corporation managed by CEO Satya Nadella, is heavily invested in the continued success of OpenAI, particularly concerning the GPT model's future developments. The recent restructuring within OpenAI, including the initiation of a research lab headed by Sam Altman and Greg Brockman, is part of this endeavor, though it introduces variables to the stability and progression of the GPT model's enhancements.

Amidst these changes, Altman has expressed a commitment to the prosperity of OpenAI and to maintaining strong operations for partners and customers in collaboration with Nadella. This is set against a backdrop of Microsoft's need to quickly adapt in response to the risks associated with these corporate shuffles.

While Nadella's recent interactions suggest he is eager to work with Altman regardless of the latter's employment status, Morgan Stanley highlights that the long-term clarity of OpenAI's leadership remains uncertain. Microsoft's strategy seems to be two-fold: resolve OpenAI's internal issues and retain its restructured leadership, or integrate OpenAI's Research Lab into Microsoft itself, ensuring the pursuit of Artificial General Intelligence continues.

The distinction between research and development is especially pronounced in software, where research involves the creation of core models like GPT, and development transforms these models into marketable products. For example, Azure OpenAI Services and GPT-powered tools demonstrate this development phase.

As one of Azure's significant clients, OpenAI has a tangible impact on Microsoft's revenue, contributing approximately $400 million in the first fiscal quarter. The future effects on Microsoft will likely depend on the sustainable growth of the ChatGPT subscriber base, which, if underfunded, could decrease rapidly.

Regarding Microsoft's hefty investment of around $11 billion in OpenAI, the priority is to satisfy developers who rely on the ChatGPT model. Altman and Brockman's leadership is thus pivotal in achieving this goal and preserving Microsoft's interests in the competitive field of generative AI.

Microsoft, OpenAI, MorganStanley