Microsoft MSFT is reportedly in discussion to invest $10 billion in OpenAI, the company that owns ChatGPT, valuing the San Francisco-based firm at $29 billion.
Launched as a prototype on Nov 30 of the last year, ChatGPT became popular among netizens because of its simple UI and easy approach to solving problems. The chatbot is a software application designed to mimic human-like conversation based on user prompts and can respond to a large range of questions, while imitating human speaking styles.
The funding conditions stipulated that Microsoft would get 75% of OpenAI's income up until the point at which OpenAI had earned back its initial investment from ChatGPT and other businesses like the image creation tool Dall-E.
Once OpenAI reaches that milestone, Microsoft would own a 49% share in the company, followed by 49% from other investors and 2% to OpenAI's nonprofit parent.
Microsoft is all set to leverage ChatGPT, a new smart chatbot from OpenAI, in its search engine Bing and Office apps like Word, PowerPoint and Outlook. The tool went viral on social media soon after its launch in November 2022, crossing the 1-million-user mark in just a week after it was opened to the public.
Microsoft Corporation Price and Consensus
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
Microsoft’s Strengthening Relationship With OpenAI
The company is leaving no stone unturned to augment AI capabilities to gain competitive edge over its peers in the digital transformation era. We believe that Microsoft is capitalizing on the rapid adoption of supercomputing systems, which is expected to be a key catalyst for the company. Per ResearchAndMarkets, the global supercomputer market is expected to grow to $21.07 billion in 2026, witnessing a CAGR of 19.1%.
Microsoft’s Azure OpenAI service is a fully managed and enterprise-focused product that gives customers access to OpenAI’s technologies with added features. Under this banner, Microsoft allows companies to leverage large-scale models.
After investing $1 billion in OpenAI in 2019, Microsoft acquired the exclusive license to the Generative pretrained transform-3 (GPT-3) model, allowing it to directly integrate the technology into its products. The GPT-3 platform was introduced by OpenAI in 2020, which could produce human-like text based on a prompt.
In 2021, Microsoft started integrating GPT-3 in its low-code app development platform, Power Apps, allowing users, even those with little to no coding knowledge, to build apps.
In May 2022, the company launched a service for Azure Cognitive Services, expanding its long-running relationship with OpenAI. Microsoft expanded the umbrella of services to include additional use cases on a pay-as-you-go basis. Apart from the access to GPT-3, customers can use Codex and other responsible AI tools.
OpenAI released a deep learning model called DALL-E in 2021 to generate images based on natural language prompts. In October, Microsoft introduced invite-only access to DALL.E’s successor, DALL-E 2 for select Azure OpenAI Service customers to generate custom images using either text or images.
Zacks Rank & Key Picks
Microsoft currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader Computer and Technology sector are Bandwidth BAND, Clearfield CLFD and Zscaler ZS. While Bandwidth and Clearfield currently sport a Zacks Rank #1 (Strong Buy), Zscaler carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Bandwidth’s fourth-quarter 2022 earnings has been revised by a penny to 4 cents per share over the past 60 days. For 2022, earnings estimates have moved north by 25 cents to 37 cents per share in the past 30 days.
BAND's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 301.8%. Shares of the company have declined 66.4% in the past year.
The Zacks Consensus Estimate for Clearfield's first-quarter fiscal 2023 earnings has been revised 15 cents northward to $1.02 per share over the past 60 days. For fiscal 2023, earnings estimates have improved 37.5% to $4.95 per share over the past 60 days.
CLFD’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 39.7%. Shares of the company have risen 16.2% in the past year.
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 3 cents north to 29 cents per share over the past 30 days. For fiscal 2023, earnings estimates have moved north by 6 cents to $1.23 per share in the past 30 days.
ZS' earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 28.6%. Shares of the company have declined 60.2% in the past year.
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