French bank BNP Paribas: Microsoft Corporation (MSFT.US) and OpenAI revise agreement to further pave the way for AI acceleration.

French Paris Bank (BNP Paribas) said on Tuesday that the revised agreement between Microsoft Corporation (MSFT.US) and OpenAI paves the way for "further acceleration in the field of artificial intelligence." Under the agreement, Microsoft Corporation will hold a 135 billion dollar stake in the ChatGPT developer. Stefan Slowinski, Senior Analyst at the stock research department of BNP Paribas, wrote in a report to clients, "For Microsoft Corporation, we believe today's announcement removes a long-standing uncertainty factor. Investors now have a clearer understanding of the future cooperation between OpenAI and Microsoft Corporation, and can reasonably incorporate the OpenAI shares held by Microsoft Corporation into its valuation system, rather than letting OpenAI's losses simply drag down Microsoft Corporation's earnings per share growth." Slowinski explained that OpenAI has pledged to invest 250 billion dollars in Azure cloud services, which also helps "alleviate market concerns." Previously, investors were worried that Microsoft Corporation might miss out on potential revenue of tens of billions of dollars. Slowinski added, "At the same time, Microsoft Corporation can also access some of OpenAI's research intellectual property (IP), which will accelerate Microsoft Corporation's research and development process in the field of cutting-edge AI models. Considering that Microsoft Corporation needs to support both its internal AI projects and meet the investment commitments in the new agreement with OpenAI, its capital expenditures (capex) may further increase." Slowinski pointed out that this revised agreement also has implications for other technology companies such as Oracle Corporation (ORCL.US), Alphabet Inc. Class C (GOOGL.US), and Amazon.com, Inc. (AMZN.US). For Oracle Corporation, he stated that as OpenAI transitions to a "public benefit company," the release of SoftBank's second part of funding enables the renegotiation of the agreement, which may alleviate investor concerns about whether OpenAI can provide funding support for its computing power commitments. Slowinski speculated, "More importantly, with OpenAI being a public benefit company, whether raising more funds as a for-profit private entity or ultimately through an initial public offering (IPO), its positioning is more favorable." He also added that OpenAI may also reach cooperation agreements with Oracle Corporation in the future. Regarding Amazon.com, Inc., even though OpenAI's GPT API remains exclusively owned by Microsoft Corporation Azure, this agreement may still have a positive impact on Amazon.com, Inc.'s cloud service (AWS). Slowinski said, "It is worth noting that among the major hyperscale cloud service providers, Amazon.com, Inc. is the only company that has not reached a cloud service cooperation agreement with OpenAI - Microsoft Corporation, Alphabet Inc. Class C, Oracle Corporation, and Coreweave are all supporting OpenAI's workloads. We believe that the cancellation of Microsoft Corporation's 'right of first refusal' gives OpenAI the opportunity to cooperate with AWS in the future. Given that OpenAI plans to increase revenue to $200 billion by 2030 (and the OpenAI management believes that access to computing power is currently the biggest limiting factor), we now consider the possibility of OpenAI and AWS cooperating to be very high, as AWS is still a large-scale high-performance computing source that OpenAI has not developed yet." Slowinski also stated that this agreement may prompt Anthropic to invest more funds in Amazon.com, Inc.'s cloud services to further expand its own scale. On the other hand, he believes that the agreement may have a negative impact on Alphabet Inc. Class C: "On one hand, the cancellation of the 'right of first refusal' may allow OpenAI to have a closer cooperation with Alphabet Inc. Class C's cloud (Google Cloud), especially in acquiring Alphabet Inc. Class C tensor processing units (TPUs) - similar to the recent mode of cooperation between Anthropic and Alphabet Inc. Class C. However, on the other hand, OpenAI can now raise funds through private and public capital markets to drive growth, and may be more proactive in expanding new sources of revenue in the future, especially in the advertising sector. Consequently, OpenAI may ultimately capture more market share in commercial search queries, which will once again raise concerns in the market about AI search competition."