According to sources cited by Semafor on Monday, Microsoft Corp. (MSFT.O) is in talks to invest $10 billion in ChatGPT owner OpenAI, valuing the San Francisco-based company at $29 billion.
According to the report, the goal is to close the round by the end of 2022, and deal documents have been sent to potential investors in recent weeks. The funding includes other venture firms.
OpenAI did not immediately respond to Reuters’ request for comment, and Microsoft declined to comment.
This comes in response to a report in the Wall Street Journal that stated that OpenAI was in talks to sell existing shares at a valuation of approximately $29 billion, with venture capital firms like Thrive Capital and Founders Fund purchasing shares from existing shareholders.
On November 30, the ChatGPT chatbot was made available for free public testing by OpenAI, which was founded by investor Sam Altman and CEO of Tesla Inc. (TSLA.O) Elon Musk. A chatbot is a piece of software that responds to user commands to imitate human conversation.
According to the Semafor report, the terms of the funding included Microsoft receiving 75% of OpenAI’s profits until it recouped its initial investment. Once OpenAI figured out how to make money with ChatGPT and other products like the image creation tool Dall-E, the nonprofit parent of OpenAI would receive 2%, and other investors would receive another 49%. The report did not specify what the stakes would be until Microsoft received its money back.
The Information reported last week that Microsoft, which made an investment of one billion dollars in OpenAI in 2019, was working on launching a version of its search engine Bing that makes use of the AI behind ChatGPT.