Microsoft to Reportedly Invest $10 Billion in ChatGPT

Citing people familiar with the matter, Semafor is reporting that Microsoft is in talks to invest $10 billion into OpenAI, the owner of the ChatGPT chatbot.

Although it isn’t yet confirmed if a deal has been finalized or not, the funding would value OpenAI at $29 billion, including the new investment.

The report adds that Microsoft’s infusion would be part of a complicated deal in which the company would get 75% of OpenAI’s profits until it recoups its investment.

Once that threshold is reached, it would revert to a structure that reflects ownership of OpenAI i.e. Microsoft having a 49% stake, other investors taking another 49% and OpenAI’s nonprofit parent getting 2%.

There’s also a profit cap that varies for each set of investors — unusual for venture deals, which investors hope might return 20 or 30 times their money. The terms and the investment amount could change, and the deal could fall apart.

The Wall Street Journal reported last week that ChatGPT was allowing employees and early investors to sell their shares at a valuation of $29 billion.

Whatever the outcome, $29 billion is nonetheless a big valuation for OpenAI and $10 billion is a big price tag for Microsoft’s shareholders.