Internal emails reveal the fear that prompted Microsoft's OpenAI investment and pushed Google into an AI panic

Microsoft’s hefty investment into OpenAI was borne out of fear that Google was outpacing the firm in AI, according to an internal email exchange between Microsoft executives.

The emails, disclosed as part of the Department of Justice’s (DoJ) ongoing antitrust trial against Google and first reported by Business Insider, point to the reactive measures prioritized by Microsoft in the recent AI boom. 

Microsoft CTO Kevin Scott warned CEO Satya Nadella and Bill Gates of the quality of Google’s AI capabilities, adding that the tech giant was likely “multiple years behind the competition in terms of ML scale”.

The email exchange is carried out under the subject line “Thoughts on OpenAI”, and Microsoft’s CTO notably puts OpenAI and Google on a similar level in terms of their AI position.

“The thing that’s interesting about what OpenAI and DeepMind and Google Brain are doing is the scale of their ambition,” Scott said.

Scott specifically highlighted the moves they were making in “datacenter design” and “distributed systems architectures”, all under Nadella’s reply which describes Scott’s email as an effective explanation of “why I want us to do this”.

There is scope to speculate that Nadella is here referring to the substantial $1 billion investment Microsoft made into OpenAI in 2019, an investment which began a long-running commitment to the AI start up. 

Microsoft has since invested a total of about $13 billion into OpenAI, though not without garnering a sizable amount of unwanted attention from various competition watchdogs on both sides of the Atlantic.  

This vast sum of money now appears to be a product not of innovation but of competitive fears that its rival may be moving more quickly.

Microsoft success sent Google into a frenzy

Ironically, Microsoft’s relationship with OpenAI prompted a similarly dramatic shift in Google’s own AI strategy, as the firm began to foster fears that it too was falling behind its rival in the generative AI race.  

Following Microsoft-backed developments in ChatGPT, Google almost immediately began to pursue an equally reactive AI strategy.

In early 2023, the firm entered a state of ‘code red’, reassigning staff and resources to prioritize new AI developments and releases across the company.

According to reporting from the New York Times, CEO Sundar Pichai led the charge, with claims that employee work was “upended” in order to focus on responding to the threat of Chat GPT.

Many of Google’s subsequent AI efforts have been as uncoordinated as this first effort to ramp up its strategy, with the lack of a cohesive vision marring its developments and the failure of products like Bard hanging over the firm’s head.

This initial flurry at Google appears to have leveled off now, though. In late 2023, the firm rebranded its Duet and Bard products under the Gemini banner in a move that was hailed by industry analysts as a clear sign it was beginning to articulate its AI vision for 2024 and beyond. 

This view was reaffirmed at Google Cloud Next in April in which the tech giant unveiled a flurry of new products and services. Analysts once again noted the tone of the event and scale of product offerings will stand the firm in good stead moving forward. 

Recent earnings reports also point toward a pending charge in the generative AI space and fiercer competition with Microsoft.