Despite the potential of the move, Microsoft is set to be greatly impacted by its OpenAI investment. Indeed, the company’s CFO, Amy Hood, recently said that the investment will have an impact on its earnings for this quarter. Although the move will be beneficial in the long run, the cost will undoubtedly cut into profits.
According to Hood, the company will report nearly $1.5 billion in expenses. That will be in large part because of the loss that the company is predicting to take on its investment into the ChatGPT developer. To this point, the company has put nearly $14 billion into the company, with its most recent investment coming as recently as October.
Source: NBC News
Also Read: IBM: Will It Be Worth More Than Microsoft (MSFT) By 2035?
Microsoft’s OpenAI Plan is Costing MSFT Big This Quarter
The AI shift in the information technology sector has been massive in 2024. Indeed, it has undoubtedly impacted Wall Street. Demand has driven the stock market’s reaction, driving companies like Nvidia (NVDA) up almost 200% this year. Yet, the race to keep up within the AI arms race has come with a steep cost.
For Microsoft (MSFT), that will be felt in the short term, as its CFO has noted that the company’s OpenAI investment will cut into this quarter’s earnings. Specifically, Amy Hood has prepared stockholders for a $1.5 billion hit to income in the current period. The main driver of that loss is the generative AI firm.
Source: Mint
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The investment seemed to be a slam dunk when it first took place. OpenAI’s ChatGPT was the product that inspired the generational shift in AI demand. Its meteoric rise drove consumer interest. Therefore, it incited companies like Apple (APPL) and Amazon (AMZN) to join the race.
Although Hood insists that the endeavor is still generating revenue for Microsoft, OpenAI is losing funds rapidly. The firm is projecting $5 billion in losses in 2024. However, Hood assures that the losses are accounted for under the equity method. As the collaboration continues to deliver, the company is reportedly committed to building IP and creating new revenue avenues, a spokesperson said in a recent email.
