Microsoft Concern About Google’s Lead Drove Investment in OpenAI

Leah Nylen and Shirin Ghaffary, Bloomberg News

Satya Nadella, chief executive officer of Microsoft Corp., speaks during the company event on AI technologies in Jakarta, Indonesia, on Tuesday, April 30, 2024. Microsoft will invest $1.7 billion to build out cloud computing and artificial intelligence infrastructure in Indonesia, betting on Southeast Asia’s biggest economy to spur growth. Photographer: Dimas Ardian/Bloomberg , Bloomberg

(Bloomberg) -- Microsoft Corp.’s motivation for investing heavily and partnering with OpenAI came from a sense of falling badly behind Google, according to an internal email released Tuesday as part of the Justice Department’s antitrust case against the search giant.

The Windows software maker’s chief technology officer, Kevin Scott, was “very, very worried” when he looked at the AI model-training capability gap between Alphabet Inc.’s efforts and Microsoft’s, he wrote in a 2019 message to Chief Executive Officer Satya Nadella and co-founder Bill Gates. The exchange shows how the company’s top executives privately acknowledged they lacked the infrastructure and development speed to catch up to the likes of OpenAI and Google’s DeepMind.

The email was released late Tuesday after media organizations including the New York Times and Bloomberg intervened in the landmark antitrust suit to push for greater public access. The US Justice Department has argued that OpenAI’s ChatGPT and other innovations may have been released years ago if Google hadn’t monopolized the search market.

Scott, who also serves as executive vice president of artificial intelligence at Microsoft, observed that Google’s search product had improved on competitive metrics because of the Alphabet company’s advancements in AI. The Microsoft executive wrote that he made a mistake by dismissing some of the earlier AI efforts of its competitors.

“We are multiple years behind the competition in terms of machine learning scale,” Scott said in the email. Significant portions of the message, titled ‘Thoughts on OpenAI,’ remain redacted. Nadella endorsed Scott’s email, forwarding it to Chief Financial Officer Amy Hood and saying it explains “why I want us to do this.”

Microsoft and OpenAI declined to comment. A Google spokesperson did not immediately respond to a request for comment.

Read More: How Microsoft’s $13 Billion Bet Made It a Force in AI

Microsoft has poured more than $13 billion into its partnership and backing of OpenAI, tapping the startup’s generative-AI technology to enhance its Bing search service, Edge internet browser and, most notably, integrate an AI Copilot service into Windows. Nadella has elevated the AI race to a priority at the company, also recruiting DeepMind co-founder Mustafa Suleyman to run its consumer AI business.

Nadella answered questions about the email when he testified at the trial last fall. The company’s OpenAI “investment was not made with the narrow focus on just search,” he said at the time.

Microsoft and Google declined to make the email available when requested by reporters last year on the grounds that it would reveal sensitive business information. Media outlets pushed for its release, and Judge Amit Mehta last week ordered the companies to provide a redacted version, as the contents “shed light on Google’s defense concerning relative investments by Google and Microsoft in search.”

Google and the Justice Department will make closing arguments in the case on Thursday and Friday. Judge Mehta is expected to issue his decision later this year.

The case is US v. Google, 20-cv-3010, US District Court, District of Columbia.

(Updates with response from OpenAI)