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Microsoft Outsources AI, Boosting Google's Advantage

Microsoft is handing over the reins of its top AI tools to OpenAI, a move that could give Google a significant edge
June 10, 2024

In a surprising shift, Microsoft is entrusting the development of its leading artificial intelligence tools to OpenAI, a move that could give its rival Google a strategic advantage. Todd McKinnon, CEO of identity security firm Okta, highlighted this development in an interview with CNBC, emphasizing how Google’s in-house research continues to set the pace in AI innovation.

McKinnon pointed out that the key technology behind today's generative AI, known as transformers, originated from Google's extensive research efforts. These deep-learning models, which understand context by analyzing relationships in sequential data, form the backbone of modern AI advancements. “The breakthroughs in generative AI are fundamentally powered by Google’s research,” McKinnon remarked.

Microsoft, on the other hand, is pivoting towards a role that McKinnon describes as an "AI consultancy." This shift follows Microsoft's significant financial commitment to OpenAI, which has reached approximately $13 billion. This partnership has fueled the integration of OpenAI's cutting-edge technology into Microsoft's products, such as the CoPilot AI chatbot and AI-enhanced PCs.

Despite Microsoft's aggressive investment and integration strategy, McKinnon expressed concerns that this reliance on OpenAI might reduce Microsoft to a secondary role in AI development. “Imagine working at Microsoft and seeing OpenAI take the lead on innovation. It’s almost like Microsoft is becoming a consulting company,” he noted.

Meanwhile, Google faces its own challenges. Despite being a pioneer in AI research, Google's commercial success in AI has been hampered by several missteps. Notably, its Gemini AI chatbot faced public scrutiny after a social media ad showcased the chatbot providing incorrect information. More recently, Google's Gemini AI generated erroneous historical images, prompting the company to temporarily withdraw the feature for further refinement.

The competitive landscape in AI is shaped by immense financial investments. McKinnon observed that AI’s evolution differs from previous tech waves, such as personal computers and cloud computing, which were driven by disruptive innovation rather than sheer financial muscle. "The only reason OpenAI can achieve its breakthroughs is due to the massive R&D investment—$10 billion from Microsoft,” he said.

These substantial investments by tech giants have also raised concerns about market competition and regulatory scrutiny. McKinnon warned that issues like disinformation, fueled by advanced AI, could hinder technological progress and lead to stringent regulations, potentially consolidating control of AI advancements among a few dominant companies. “The potential for AI is enormous, but over-regulation might leave only the biggest, most powerful companies in control,” he cautioned.

As the race in AI development intensifies, Microsoft and Google are navigating complex challenges and opportunities. While Microsoft's partnership with OpenAI propels it forward, Google's internal research continues to drive foundational innovations, setting the stage for a dynamic and competitive AI landscape.

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