OpenAI’s ChatGPT platform, popularly dubbed a “Google Killer,” has taken the internet by storm. It took ChatGPT just 5 days to reach 1 million users. Instagram took 2.5 months, Facebook 10 months, Airbnb 2.5 years and Netflix 3.5 years to reach this milestone. The sheer speed of uptake – relative and absolute - provides a timely reminder of just how critical participation in funding rounds on the one hand, and M&A on the other, are for firms seeking to remain competitive when it comes to disruptive technologies like Artificial Intelligence.

The main difference between ChatGPT and traditional natural language processing models is that ChatGPT uses a neural network architecture and unsupervised learning to generate responses. It is clear why it has attracted so much attention: there are endless applications for this tool, from writing and debugging computer programs, drafting poems and essays, to explaining complexities in the fields of mathematics and statistics, or even philosophy. And this is just the beginning. ChatGPT 4.0, which is 500 times more powerful than the current version, is rumored to be scheduled for release sometime in 2023.

Before the launch of ChatGPT in November last year, OpenAI was valued at $14B; as of now their valuation has more than doubled to around $29B. They are expected to generate $200M in revenue for 2023 and $1B in 2024.

It’s not just OpenAI. The entire AI industry is growing at an astonishing speed, with a projected CAGR of 20.1% from $328B in 2021 to $1,394B in 2029. Most prominent among the innovations boosting demand in the market are AI-powered IoT solutions which enhance IoT’s scalability, reduce costs and improve operational efficiency. Consumer-centric industries such as Financial Services, Healthcare and Retail are among the fastest AI adopters.

In today’s competitive business environment, companies can either develop these innovative capabilities from scratch or through mergers and acquisitions. With 'homegrown’ solutions taking years to implement, firms are increasingly opting for the latter. As of October 2022, AI M&A deals were worth around $17B, which is a YoY increase of 64.6%.

In 2019, OpenAI received a $1B investment from the likes of Microsoft and Mathew Brown Companies. Microsoft is adding $10B into OpenAI to deepen the relationship with them and make room for future adoptions of this groundbreaking application. ChatGPT is currently being implemented in Microsoft Office and Azure products, with plans to create a GPT-powered Bing search tool to counter Google’s dominance in the search engine market.  

Microsoft already owns GitHub (acquired in 2018), which recently released Copilot (AI-powered programmer co-developed with OpenAI), DALL.E (OpenAI), which powers the Bing Image Creator; and VALL-E, which can clone voices from a three-second audio clip. Additionally, Microsoft acquired Nuance Communications, a leader in conversational AI for healthcare and customer engagement, in March 2022 for $19.7B, making it their third biggest acquisition to date.  

On the other hand, Google acquired Alter (AI avatar startup), Phiar Technologies (Spatial AI Engine), and Vicarious (AI/Robotic intelligence) all in 2022. What is more, Google is leveraging its $500M+ acquisition of DeepMind to launch its own chatbot, Sparrow, shortly.  

One thing is clear, ChatGPT has changed the way AI-powered tools are perceived and it can be argued that this is the biggest technological breakthrough since the invention of the worldwide web. Companies that fail to seize investment opportunities on the market are going to be faced with loss of market share and shrinking profitability. The AI race has just started. Buckle up and start thinking about how your company will leverage disruptive technologies!

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