Microsoft was once called "antique"
In 2023, ChatGPT detonated widespread global attention to artificial intelligence. The scientific and technological circles, intellectual circles and industry circles have fiercely debated the development prospects and impact of AI (artificial intelligence). ChatGPT itself is triggering a series of profound chain reactions, sweeping across industries, enterprises, countries and even individuals. Learning to do AI models and AI commercialization has also quickly become a hot topic.
Just a month after the launch of ChatGPT last year, Microsoft CEO Nadella said proudly at the shareholder meeting, "ChatGPT is one of the most popular AI applications today, and it is all trained on the Azure (Microsoft cloud service platform) supercomputer." OpenAI is also behaving "you and me" to Microsoft, and its spokesperson has publicly stated that Microsoft owns the exclusive license to GPT-4 and all other OpenAI models. As an old giant, Microsoft has a new color and has taught many Internet companies a lesson. As if ChatGPT was just like Microsoft's doing, the "poor performance" of Bard, which Google hastily launched next door, became a laughing stock, which is even more contrary to Microsoft's uniqueness. According to statistics, there are 67 large models with more than one billion level parameters in China, but it can be called the successor of ChatGPT has not yet appeared, and Microsoft with exclusive licenses is not "winning hemp".
But this was not the case with Microsoft before 2014, which once stuck in an old-fashioned symbol. The most direct impression from the outside world is that it failed to seize the wave of mobile Internet and gradually fell behind in the competition with old rivals such as Apple and Google. From aQuantive to Skype to Nokia, these three big acquisitions in Internet history alone burned $22 billion, or about 150 billion yuan. Microsoft has always been in the dilemma of passive catch-up, eager to win, deformed in action, and chicken feathers. Nadella concludes in the book, "It may be easier to inspire change through jealousy. We can be jealous of Apple's iPhones and iPads, or we can be jealous of Google's low-cost Android phones and tablets. But jealousy is negative and externally driven, not internally. So I know that jealousy won't get us very far on the path to true rebirth. ”
Nadella took office in 2014, a gentle, "humble" "good old man" who helped Microsoft start with corporate culture and reinvent itself. In an all-staff letter from his year in office, Nadella gave a strategic map centered on "digital work and life experiences," surrounded by various cloud platforms and computing devices.
It is under the guidance of this idea that Microsoft's overall research and development thinking has changed, oriented to the "mobile experience". In 2018, Microsoft announced the end of the Windows division and the establishment of the "Cloud and AI Platform Division". At this stage, the rise of cloud computing business to Microsoft's second growth curve may still not be visible on the consumer side, but this elephant turn allows Microsoft to return to the first throne of technology companies, and the stock price once surpassed Apple in Q4 2021.
Microsoft seizes the "digital opportunity"
Some investors think that Microsoft is just a good fate, betting so much that OpenAI exploded, and that luck is greater than strength. But this is not the case, just like Microsoft CEO Nadella was actively deploying cloud platforms and computing devices as early as 2014, which is the prerequisite for the explosion of AI.
Now, Microsoft's cloud business has become the backbone. The smart cloud business with Azure as the core is Microsoft's growth fulcrum, achieving revenue of US$14.7 billion in fiscal 2023, a year-on-year growth rate of 31%. At that time, Microsoft also made a clear judgment on the future layout, betting on mixed reality, artificial intelligence, and quantum computing early. In the 2018 book, Nadella makes it clear that "apps like Office 365 and Dynamics 365 will incorporate artificial intelligence so they can help us focus on what matters most and make the most of every bit of time." Now, five years later, Microsoft has indeed achieved it.
When Microsoft invested in OpenAI in 2019, public opinion was in an uproar, OpenAI was originally a non-profit organization, because the research was too expensive, it began to establish a for-profit organization, but did not wait for big money, until Microsoft appeared. At that time, the two parties agreed that Microsoft would become the exclusive cloud computing provider of OpenAI, which means that OpenAI will not only use the Microsoft Azure cloud, but also its AI technology output will pass through the Azure cloud.
Microsoft's ambitions are not only to empower its own devices through AI, but also to incubate more ChatGPT. On April 12, Microsoft launched the open-source DeepSpeed Chat, a low-cost open-source solution for RLHF (reinforcement learning from human feedback) training, in other words, with it, most people have the opportunity to create ChatGPT-style models because of the speed of training and the relatively affordable price. The influence of DeepSpeed Chat is still fermenting, and it is certain that in this year's AI battlefield where giants are fighting bayonets, Microsoft is the most proud one.
Once upon a time, it was a time when mobile phones were more important than computers. In the mobile operating system market, the position is reversed, Google's Android occupies 70% of the share, Apple occupies the remaining 30%, and Microsoft has no position. "In this rapidly exploding market, Microsoft not only did not lead, but even did not have the opportunity to participate," Nadella, Microsoft's new CEO in 2014, lamented in his 2018 book "Refresh", when (referring to 2014), global personal computer shipments began to decline after decades of steady growth, personal computer shipments were about 70 million units, and smartphone shipments had exceeded 350 million. Microsoft has been chasing wildly, and everyone knows what the result is, although it has not abandoned the mobile phone business, but the impact is negligible.
Today's AI wave is like a copy of the year, the people at the helm of giant companies, are at the forefront of the industry, Google is unlikely not to see the breakthrough of the big language model, the earliest big language model paper, they wrote. But for Google, making the language model bigger also means hitting search, which is not good for the advertising business. And Google has secured the mobile advertising search business, "saving his own life" is too painful, and this just gives Microsoft the opportunity to raid.
Microsoft 365 Copilot is poised to unleash productivity by combining next-generation AI and Microsoft Graph and Microsoft applications. At the same time, the company increased productivity by reducing manual data entry, content generation, and note-taking with Dynamics365 Copilot, which works across CRM and ERP systems.
Unfortunately, the quarterly report as of the end of March coincides with the March and April months when Microsoft frequently launched new products in the field of AI. But we can only glimpse part of the impact. Microsoft's Q3 FY23 revenue was $52.9 billion, up 7% year-over-year, and non-GAAP EPS was $2.45, up 9% year-over-year, beating market expectations.
But Microsoft is already one of the biggest gainers this year, thanks to risk aversion in the financial sector and continued momentum from generative AI, as investors turn to big tech havens. Microsoft, which remains the largest component of the tech-dominated Nasdaq 100, has traded "significantly above its long-term average" in recent months, with Microsoft surging about 20 percent this year.
Can Microsoft dominate "tech stocks" with AI?
Some people may think that today's Microsoft can have a laugh until the end of the champagne, just watch the competitors catch up. Microsoft, of course, hopes so, but the truth is different from what he wants.
Microsoft and OpenAI, the initial investment model is different from investing in ordinary companies. According to foreign media reports, Microsoft's profit distribution agreement with OpenAI is that Microsoft will receive 75% of OpenAI's profits in the early stage until Microsoft recovers its $11 billion investment. When OpenAI's profits reach $150 billion, the shares of Microsoft and other venture investors will be transferred to OpenAI's nonprofit fund for free. That is to say, Microsoft wants to hold OpenAI all the time, the two sides have a limited date of binding.
Interestingly, there is also a "competitive relationship" between the two companies. Recently, Microsoft instructed Azure salespeople to tell potential customers that OpenAI's license is "great for experimentation" but has "limited enterprise-level features" and fewer "security/privacy features," according to The Information. These strategies have helped Microsoft acquire new customers. In other words, Microsoft is using the weaknesses of OpenAI products to grab customers. At the same time, the news also mentioned that OpenAI did not give Microsoft access to its Azure-licensed software in time, including the Whisper model, which went on sale on March 1. OpenAI delayed granting Microsoft access to the Azure ChatGPT API, allowing it to grab customers like Snap and Instacart. This means that OpenAI also "left a hand" for Microsoft.
Some foreign technology practitioners told the media, "OpenAI regards Microsoft as a big customer, not a controller." Some analysts expect Microsoft to try to acquire OpenAI. Some investors believe that based on its current valuation, OpenAI's more likely path is to eventually conduct an IPO. However, OpenAI's spokesperson has publicly stated that there are no plans to go public or be acquired.
This is very embarrassing, Microsoft to position itself as a leader and pioneer of AI, AI is becoming Microsoft's ubiquitous core technology, AI involves products will account for more than 42% of Microsoft's revenue, AI may eventually account for 25% of Azure revenue, an investor optimistic said, "Driven by AI, we will not be surprised that Azure's revenue will exceed AWS at some point." ”
If Microsoft and OpenAI are unhappy in the future, and the follow-up cooperation is affected, it is difficult to say how far its AI can go. As for how ChatGPT subverts the search engine, the most hotly discussed issue before, the extent to which Bing benefits and whether it can leverage the online advertising market is still unknown. Microsoft's search and news advertising revenue grew only 10% year-over-year in the first quarter of this year, down from 23% in the same period last year and flat sequentially. According to Tianfeng Securities, Bing's global market share in March 2023 was 2.88%, although it was a slight increase from 2.81% in February, but it was still down from 3.1% in the same period last year, and the gap with the leading Google (93.18%) is large.
Ten thousand steps back, Microsoft's falling out with OpenAI will only happen in a few years. Microsoft's ability to monetize ChatGPT now is still uncertain, and it will take some time for Microsoft to fully integrate ChatGPT with Bing. Although Microsoft recently discussed integrating sponsored ads into chatbots' responses to queries, the commercialization of the aforementioned plan is still under development. Selling ads with AI is realistic but not sexy, and it doesn't quite fit the public's stereotype of ChatGPT, and the public's welcome to ChatGPT is also an aversion to search for ads everywhere.
In the US market, in February this year, the market share of the Windows desktop operating system has fallen to an all-time low of 57.37%, while the high point of this figure is 92.37%. At the same time, Apple's share of macOS is rising, accounting for 29.62% in February.
Microsoft has been vigilant, still does not want to lose the dominance of the desktop operating system, Microsoft CEO Nadella threw out heavy news: the operating system-level "AI assistant" Windows Copilot will release a preview version in June, adapted to the latest Windows 11 system. This means that the world's first PC operating system with integrated artificial intelligence functions is born, and the "AI moment" of Windows is coming. Whether it was rolled up to Google does not know, but Microsoft's own operating system rolled up first.
Write at the end
In fact, regarding artificial intelligence, although Microsoft laid out early, it did not rely on itself to establish an uplifting business. Instead, Microsoft has removed the Clippy assistant from Word, Cortana from the Windows taskbar, and Tay from Twitter. Microsoft Cloud is still a rapidly growing B-side service with the help of Microsoft's B-side business, otherwise what we see today is not OpenAI releasing ChatGPT but how Microsoft does.
However, Microsoft's heavy investment in AI is still worthy of respect, which shows that Microsoft still values technology-driven cultivation of disruptive technologies, and Microsoft is still a great company. I don't doubt that Microsoft 365 Copilot will bring efficiency gains, but it remains to be seen how much it can be improved, and whether it is necessary for everyone.
Resources:
Microsoft at a turning point in history Source: 20 Press
Is Microsoft really okay again? Source: Deep Burn
Microsoft ushered in a highlight moment Source: Wall Street events
Microsoft with ChatGpt in hand wins hemp Source: Futu
Microsoft arranges a "new job" for Windows Source: Bento Finance