Within three years OpenAI will find it so difficult to raise funds it will need to sell to Microsoft, an analyst firm has predicted.
CCS Insight claims dwindling interest in AI will force firms such as OpenAI and Anthropic into the arms of investors with deeper pockets, with Microsoft and Amazon the most likely suitors for the two AI companies.
“We think there’s going to be a bit of a correction in the AI space because the hype starts to blow out of it,” said Ben Wood, chief analyst at CCS Insight.
The AI companies “are going to start questioning whether it makes sense for them to carry on, but they’re also going to need a lot of money, because investors focus might shift away from that [AI], and the startups will just find it difficult to keep funding for the innovation that they want to do,” Wood added.
While Wood concedes that OpenAI’s latest funding round shows it’s “having no trouble raising cash at the moment,” he believes the situation could change over the next few years. “We’re talking about this [takeover] in 2027, so this is quite a long way down the road,” he said.
OpenAI is pivotal to Microsoft, because its Copilot AI services are largely based on OpenAI’s GPT technology. “It might be that Microsoft sees that there’s a strategic importance in owning OpenAI outright and keeping complete control of how the business shapes up in the future,” Wood said.
Microsoft Links
Microsoft has been linked with a takeover of OpenAI in the past, not least in November 2023 when boardroom turmoil resulted in CEO Sam Altman temporarily leaving the firm and joining Microsoft for a very brief period.
That situation was quickly resolved, with Altman rejoining OpenAI following protests by the company’s staff. But with Microsoft’s AI business hugely reliant on OpenAI, Microsoft may decide to make its move when the investor hype surrounding AI dies down, according to CCS Insight.
“The vast amounts of money that’s required to keep these AI services going, and the fact that you need to keep a competitive edge at a time when it’s getting more and more competitive, we think that may well encourage the leading stakeholders to get more actively involved,” said Wood.
Nvidia In Danger
Nvidia has been one of the biggest beneficiaries of the AI boom, seeing its share price shoot up nine-fold since the beginning of 2023. However, CCS Insight predicts that Nvidia’s time in the sun may be coming to an end.
Wood said the company’s CUDA framework, which powers many of the leading AI services, is “very much the only game in town” at the moment, and that the company is still struggling to meet demand for its chips. “But there will come a point where that will start to come into better balance,” he said. “I think that Nvidia’s position will weaken, and also we’ll see the competitive landscape changing.”
He thinks open-source alternatives to CUDA and the “general slowdown” in AI investment “will mean that Nvidia’s position won’t be quite as enviable as it is right now.”
Wood cites Meta CEO, Mark Zuckerberg, as saying that he would rather risk building AI capacity before it’s needed than after it’s too late. But he predicts that when “you’re just building, building, building, all of a sudden you’re like, ‘wow, we’ve got as much capacity as we need,’ and that’s a dangerous moment for Nvidia.”
