+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

ChatGPT parent OpenAI could help Microsoft target Google's cloud business, Ark Invest says

Feb 15, 2023, 23:00 IST
Business Insider
Satya Nadella, CEO of Microsoft.Sean Gallup/Getty Images
  • Microsoft's investment in OpenAI could be a means to target Google's cloud business, according to Ark Invest.
  • Analyst Will Summerlin wrote in a note that Microsoft could force Google to release an AI chat feature within search, weighing on its profitability.
Advertisement

Microsoft could have a larger game in mind with a recent investment in ChatGPT parent company OpenAI, according to Ark Invest analyst Will Summerlin.

In a Monday note, Summerlin wrote that Microsoft could be attempting to target Google's cloud computing sector by driving up costs.

Last week, Microsoft announced a revamp of its Bing search engine using AI chatbot technology from partner OpenAI. Like ChatGPT, the new Bing can provide detailed answers to queries but is more up to date.

That means the new Bing could force Google to revamp its own search with a similar AI chat feature, which could pressuring Google's profitability due to the higher costs for language models compared to traditional search, Summerlin said.

"We believe that Microsoft is aiming not only to lower Google's search margins but also to dissuade Alphabet from running Google Cloud and other businesses at a loss," Summerlin wrote.

Advertisement

Currently, Google processes roughly 8.5 billion searches daily, he added, noting that it's a lucrative piece of Alphabet's business model is able to fund its more costly ventures like the cloud.

"By lowering Google's search margins, Microsoft could put pressure on other Alphabet businesses, many of which compete with Microsoft," Summerlin added.

Meanwhile, the ability to monetize AI chat is less clear compared to the ad-based model for Google search, he pointed out.

But inference costs, which involves the actual prediction-making functions, are falling rapidly which could bode well for Alphabet.

"Fortunately for Google, inference costs are declining ~70% at an annual rate. According to our research, inference costs should be de minims in a few years," Summerlin said. "That said, in the short term, Microsoft is likely to exploit its competitive advantage."

Advertisement
You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article