BNP Paribas: Microsoft and OpenAI finalize revised agreement, paving the way for further acceleration of AI

According to the Zhitong Finance APP, BNP Paribas stated on Tuesday that the revised agreement between Microsoft (MSFT.US) and OpenAI paves the way for "further acceleration in the field of artificial intelligence." Under the agreement, Microsoft will hold a $135 billion stake in the ChatGPT developer.

Stefan Slowinski, a senior analyst in BNP Paribas's equity research department, wrote in a report to clients: "For Microsoft, we believe today's announcement eliminates a long-standing uncertainty. Investors now have a clearer understanding of the future of the collaboration between OpenAI and Microsoft, and can reasonably incorporate Microsoft's stake in OpenAI into Microsoft's valuation framework, rather than letting OpenAI's losses solely drag down Microsoft's earnings per share growth."

Slowinski explained that OpenAI's commitment to invest $250 billion in Azure cloud services also helps to "alleviate market concerns," as investors were previously worried that Microsoft might miss out on hundreds of billions of potential revenue as a result.

Slowinski added: "At the same time, Microsoft will also have access to some of OpenAI's research intellectual property (IP), which will accelerate Microsoft's R&D process in cutting-edge AI models. Considering that Microsoft needs to support its own internal AI projects while fulfilling 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 tech companies such as Oracle (ORCL.US), Google (GOOGL.US), and Amazon (AMZN.US).

Regarding Oracle, he stated that since OpenAI transitioned to a "public benefit corporation," the second tranche of funding from SoftBank has been released, and the renegotiation of the agreement may alleviate investors' concerns about whether OpenAI can provide funding support for its computing power commitments.

Slowinski speculated: "More importantly, after OpenAI's transition to a public benefit corporation, its positioning is more favorable for raising additional funds as a for-profit private entity or ultimately financing through an initial public offering (IPO)." He also added that OpenAI may reach a cooperation commitment with Oracle in the future.

For Amazon, even though OpenAI's GPT API remains exclusively owned by Microsoft Azure, this agreement may still have a positive impact on Amazon Web Services (AWS).

Slowinski stated: "It is worth noting that among the major hyperscale cloud service providers, Amazon is the only company that has not yet reached a cloud service cooperation commitment with OpenAI—Microsoft, Google, Oracle, and Coreweave are all supporting OpenAI's workloads.

We believe that the cancellation of Microsoft's 'right of first refusal' gives OpenAI the opportunity to reach a cloud service cooperation with AWS in the future. Given that OpenAI plans to increase its revenue to $200 billion by 2030 (and OpenAI's management believes that acquiring computing power is currently the biggest limiting factor), we now believe that the likelihood of OpenAI reaching a cooperation with AWS is extremely high, as AWS remains a large-scale high-performance computing source that OpenAI has yet to develop Slovinski also stated that this agreement could encourage Anthropic to invest more in Amazon Web Services to further expand its scale.

On the contrary, he believes that the agreement may have a negative impact on Google: "On one hand, the cancellation of the 'right of first refusal' may allow OpenAI to collaborate more closely with Google Cloud, especially in acquiring Google Tensor Processing Units (TPUs) — similar to the recent collaboration model between Anthropic and Google.

On the other hand, OpenAI can now access funding through private and public capital markets to drive growth, and may become more proactive in expanding new revenue sources, particularly in the advertising sector. Consequently, OpenAI may ultimately capture a larger share of commercial search queries, which will once again raise market concerns about competition in AI search."