Microsoft's $10 billion bet in Openai AI, a prominent AI startup, shocked the IT world. In 2019, Microsoft gave $1 billion to the project, and close to $13 billion was invested in OpenAI as a whole. Musk, Tesla's CEO, was one of 12 persons who founded OpenAI in 2015.

Most notably, OpenAI's board ousted CEO Sam Altman in August 2024. Funders, users, and OpenAI employees are furious over his departure and are threatening to resign in significant numbers. Openai AIs financial troubles may affect Microsoft's multibillion-dollar investment, but here's why its collapse might help Microsoft dominate AI.

Microsofts $13 Billion Bet on OpenAI Explained

Microsoft invested $1 billion in OpenAI, an AI company at the time. That initial investment had grown to $13 billion by 2023, as Microsoft made Azure its only cloud source for OpenAI. Moreover, big language models (LLMs) like GPT-4, which run apps like ChatGPT, are part of this strategic relationship, and its goal is to take advantage of the fast growth of creative AI technologies.

OpenAI, worth about $29 billion, has grown into a big player in AI and is now driving tasks across Microsoft's Azure platform. Moreover, Microsoft Azure's computer tools are in high demand because startups, big companies, and AI startups want to use AI in their products. Also, according to analysts, this agreement could bring Microsoft $30 billion a year, with Azure making up half of that amount.

In contrast to most tech startups, Openai AI uses a capped-profit plan that means early investors can only get back 100 times their money. Under this arrangement, any extra profit goes to a charity group, with Microsoft getting a limited cut. Furthermore, according to experts, OpenAI will also increase by 400% in just two years from 2024.

Benefits From OpenAI Partnership For Microsoft

Boost to Azure Cloud Services

OpenAI's addition to Microsoft Azure has given the company's cloud services a huge opportunity to grow. Access to GPT-4 models is available through the Azure OpenAI Service, which helps customers build AI-powered apps. Improving security, fine-tuning models, and using user data make Azure's value offering stronger.

According to 2023 data, Azure had a 22% share of the world cloud market, placing it second only to Amazon Web Services (AWS). Microsoft AI has made itself a major player in AI services by running Openai AI only on Azure. This has helped it predict a 39.44% growth in cloud income.

Enhanced Productivity Software

Microsoft 365, Microsoft's work tool, includes OpenAI's GPT-4 through Copilot, which delivers advanced AI-powered features. The direct connection with Microsoft lets Copilot give real-time replies by using live internet data, unlike rivals like LibreOffice and Zoho. In terms of market share, Microsoft Office had a huge 87% in 2023.

Moreover, OpenAI's LLM models can be easily integrated, offering a competitive edge and expected to lead to 10.3% revenue growth in this market. According to Copilot Pro, GPT-4 Turbo has priority access, which means that it can keep working even when there is a lot of traffic.

Advantage in the ERP Market

OpenAI's connection with the Microsoft Dynamics ERP platform, especially through Copilot driven by GPT-4, gives Microsoft a big edge over its rivals. Although Dynamics competes with big ERP companies like Oracle and Workday or even AI startups, it has an advantage over them because it uses AI to automate tasks and gain insights across all business processes.

Moreover, supporting areas like customer service, sales, and business with Dynamics Copilot makes things run more smoothly. The 11% CAGR in the market is expected to help Microsoft's ERP sales grow by 13.9%. This growth is directly related to the AI features built into Dynamics, which set Microsoft apart from rivals that use third-party AI interfaces.

Strengthened Search Engine Competitiveness

With the addition of GPT-4 to Bing AI, Microsoft AI has rebranded the search engine to include Copilot features. With this move, Bing is now highly competitive with search engines like Google and Perplexity AI. According to data from 2023, Bing had only about 9% of the world search engine market, a long way behind Google. However, the addition of GPT-powered Copilot gives real-time, page-specific answers and information. By integrating seamlessly, it improves the user experience on Bing, which could lead to more users. With Microsoft's wider environment and the search engine's new AI features, it has a stronger place in the market.

Competitive Edge in Operating Systems

Copilot is part of Microsoft's Windows operating system, driven by GPT-4. It lets users get AI help right in the OS. Copilot boosts features by connecting to Bing, searching the web, and offering help within the app without leaving the Windows interface.

For example, Linux and Arca OS use older AI models like ChatGPT and knowledge cutoffs, but this gives them an advantage. The addition of AI is expected to help Windows' global market share, which is currently around 76%. This will make the operating system more appealing to users who want advanced features driven by AI.

Dominance in Programming Software

Incorporating GPT-4 into GitHub Copilot has made Microsoft AI a star in computer tools. According to Openai AIs huge code collection, GitHub Copilot is widely used to create code ideas and complete code in real time. While other tools, like ChatGPT, rely on simple AI models, this level of interaction goes above and beyond them.

Additionally, with more than 100 million users, GitHub Copilot is seen as a productivity game-changer because it smoothly helps workers. This has led to more active users on GitHub and is expected to help Microsoft's developer tools section make more money.

Growth in Cloud and Software

OpenAI's exclusive relationship with Microsoft improves the collaboration between Microsoft's cloud, software, and workflow tools. Microsoft hosts the models from Openai AI in Azure and uses them in Microsoft services such as Dynamics, Microsoft 365, and GitHub. We expect this all-around approach to keep these groups growing.

Furthermore, Microsoft AI will also be able to take advantage of the growing need for AI solutions. Their ERP software is expected to grow by 13.9%, their cloud services by 39.44%, and their workflow software by 10.3%. It makes Microsoft even more competitive in all market areas by solidifying its lead in AI-driven business solutions.