ChatGPT, a Generative Artificial Intelligence model, is the top tech story of this year. After its unprecedented success, it remains to be seen whether Microsoft’s $13 billion investment in chat GPT parent company, OpenAI, can add substantial value to the tech giant’s revenue. Analysts have estimated OpenAI to add anything between $30 to $40 billion to Microsoft’s revenue.
Market research firm Market US has reported that the Generative AI market has experienced significant growth since the introduction of OpenAI’s ChatGPT in November 2022. The market was valued at nearly $11 billion at the end of 2022, and it is expected to grow at a compound average annual rate of 31% to reach $152 billion by 2032.
ChatGPT could contribute significantly to Microsoft's revenue for two main reasons:
Firstly, the Generative AI market is expanding at an annual rate of 31%, which is considerably faster than Microsoft's 18% growth in 2022.
Secondly, Microsoft's leading position in developing an AI supercomputer and introducing ChatGPT should give it an advantage in capturing a considerable portion of the Generative AI market.
Incorporation of Chat GPT into Microsoft’s Products-
Bing search engine, sales and marketing software, GitHub coding tools, Microsoft 365 productivity bundle and Azure cloud are some of the products which will incorporate Chat GPT, according to CNBC reports.
Microsoft had invested $13 billion in OpenAI by March 2023, which increased the startup's valuation to approximately $29 billion. Going by PitchBook data, OpenAI's revenue was predicted to increase by 150% to $200 million in 2022, and the company anticipates this figure to expand to $1 billion by 2024.
ChatGPT has delivered a competitive edge for Microsoft in computers that train Generative AI. As reported by Bloomberg, Microsoft invested “several hundred million dollars” in constructing an enormous supercomputer that connected thousands of Nvidia graphics processing units to train Chat GPT.
According to a CNBC report, Wells Fargo analyst Michael Turrin has projected that ChatGPT will bring in “over $30 billion in new annual revenue for Microsoft, with roughly 50% originating from Azure.”
Following the late January announcement about Chat GPT, Microsoft's stock regained its value owing to the market's optimistic approach towards the technology. However, in the absence of any new
updates on how and when Microsoft will commercialize the chatbot, the 19% growth in its shares this year reflects the estimated value of the additional revenue that Chat GPT technology will generate for the company.
If Chat GPT products contribute $40 billion to Microsoft's revenue by 2028 and the company's other businesses continue to grow at an annual rate of 18% to reach $453 billion, Chat GPT would account for 9% of Microsoft's total revenue in 2028.
