Microsoft Corp. MSFT 1.26% is in advanced talks for a new round of funding in OpenAI, according to a person familiar with the matter, as the software giant seeks to further incorporate artificial intelligence into its products.
No deal has been reached between the two sides and the funding amount could vary as negotiations evolve, the person said. The companies have held talks in recent weeks, according to people familiar with the matter. Microsoft invested $1 billion in OpenAI in 2019.
The new cash could help bankroll the tremendous computing power OpenAI needs to run its various artificial intelligence products on Azure, Microsoft’s cloud computing service.
The startup already uses Azure as its exclusive cloud partner and has agreed to give priority to Microsoft when bringing new technologies to market.Everything is now a tech thing. Columnist Joanna Stern is your guide, giving analysis and answering your questions about our always-connected world.
OpenAI earlier this year launched Dall-E 2, a project that allowed users to generate art from strings of text and showed the fast advances being made in that segment of AI technology. Last week, Microsoft announced it was integrating Dall-E 2 with various products including Microsoft Design, a new graphic design app, and the image creator for search app Bing.
Alphabet Inc.’s Google and Microsoft have each developed its own image-generating models—but have been slower to release them to the public, in part because of ethical concerns.
A newer set of startups have moved more quickly. In August, artificial intelligence startup Stability AI released its own text-to-image generator to the public. It then raised $101 million in new funding from investors including Lightspeed Venture Partners and Coatue Management.
OpenAI, led by the technology investor Sam Altman, began as a nonprofit in 2015 with $1 billion in pledges from Tesla Inc. CEO Elon Musk, LinkedIn co-founder Reid Hoffman and other backers.
In 2019, OpenAI created a for-profit company and raised the $1 billion from Microsoft, citing greater computing and staffing needs. OpenAI said it would cap profits at the company, diverting the remainder to the nonprofit group.
Much of OpenAI’s research is focused on the potential impacts of artificial general intelligence, the idea that AI systems could one day become better than humans at performing some of the most important tasks.
Some researchers have cautioned that recent advances in AI contribute to unwarranted hype around the technology, and many applications are fraught with ethical issues.
OpenAI said more than 1.5 million users created over 2 million images a day using Dall-E 2 after it was released to the public this month. The technology can turn text descriptions like “an Andy Warhol style painting of a bunny rabbit wearing sunglasses” into realistic images and artworks.
OpenAI has also developed programs to automatically generate text or computer code from written language samples, which are used by companies including Salesforce Inc. CRM 0.02% and Intel Corp. INTC 0.76%
Criticism of Microsoft has followed various aspects of its products and business practices. Frequently criticized are the ease of use, robustness, and security of the company’s software. They’ve also been criticized for the use of permatemp employees (employees employed for years as “temporary,” and therefore without medical benefits), the use of forced retention tactics, which means that employees would be sued if they tried to leave.
Historically, Microsoft has also been accused of overworking employees, in many cases, leading to burnout within just a few years of joining the company. The company is often referred to as a “Velvet Sweatshop”, a term which originated in a 1989 Seattle Times article, and later became used to describe the company by some of Microsoft’s own employees. This characterization is derived from the perception that Microsoft provides nearly everything for its employees in a convenient place, but in turn overworks them to a point where it would be bad for their (possibly long-term) health.
As reported by several news outlets, an Irish subsidiary of Microsoft based in the Republic of Ireland declared £220 bn in profits but paid no corporation tax for the year 2020. This is due to the company being tax resident in Bermuda as mentioned in the accounts for ‘Microsoft Round Island One’, a subsidiary that collects licence fees from the use of Microsoft software worldwide.
Dame Margaret Hodge, a Labour MP in the UK said, “It is unsurprising – yet still shocking – that massively wealthy global corporations openly, unashamedly and blatantly refuse to pay tax on the profits they make in the countries where they undertake business”.
In 2020, ProPublica reported that the company had diverted more than $39 billion in U.S. profits to Puerto Rico using a mechanism structured to make it seem as if the company was unprofitable on paper. As a result, the company paid a tax rate on those profits of “nearly 0%.” When the Internal Revenue Service audited these transactions, ProPublica reported that Microsoft aggressively fought back, including successfully lobbying Congress to change the law to make it harder for the agency to conduct audits of large corporations.
“Embrace, extend, and extinguish” (EEE), also known as “embrace, extend, and exterminate”, is a phrase that the U.S. Department of Justice found that was used internally by Microsoft to describe its strategy for entering product categories involving widely used standards, extending those standards with proprietary capabilities, and then using those differences to strongly disadvantage competitors. Microsoft is frequently accused of using anticompetitive tactics and abusing its monopolistic power.
People who use their products and services often end up becoming dependent on them, a process known as vendor lock-in. Microsoft was the first company to participate in the PRISM surveillance program, according to leaked NSA documents obtained by The Guardian and The Washington Post in June 2013, and acknowledged by government officials following the leak.
The program authorizes the government to secretly access data of non-US citizens hosted by American companies without a warrant. Microsoft has denied participation in such a program. Jesse Jackson believes Microsoft should hire more minorities and women. In 2015, he praised Microsoft for appointing two women to its board of directors
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