Microsoft's $13 Billion OpenAI Gamble: How Nadella Defied Gates' Warning to Transform AI Landscape

Bill Gates called it 'burning a billion dollars,' but Microsoft CEO Satya Nadella still invested it anyway. Guess who was right?

Back in 2019, when Microsoft announced its $1 billion investment in a little-known AI lab called OpenAI, even the company's founder Bill Gates wasn't convinced. Gates reportedly told CEO Satya Nadella that the move was like "burning a billion dollars." But Nadella went ahead anyway -- and that decision is now being hailed as one of the boldest and most transformative bets in the company's history. In a recent interview with TPBN, a tech-focused YouTube show, Nadella reflected on that high-stakes moment. "Even at Microsoft, you've got to get board approval to throw a billion dollars out there," he said with a smile. "It wasn't that hard to convince people this was an important area, but it was risky." Five years later, that "risky" decision has paid off beyond anyone's imagination. When Microsoft first partnered with OpenAI -- then a non-profit research outfit -- few outside Silicon Valley had even heard of it. The deal gave Microsoft early access to OpenAI's cutting-edge research and models, setting the stage for what would become a defining technological revolution. In 2022, OpenAI launched ChatGPT, and the world changed almost overnight. The chatbot became a global phenomenon, amassing a million users within five days of launch. According to CEO Sam Altman, over 800 million people now use OpenAI's tools weekly -- a scale few could have predicted back when Nadella made the call. Microsoft has since deepened its partnership, investing more than $13 billion in OpenAI. The collaboration has reshaped the company's ecosystem -- from integrating AI across Windows and Office to redefining its cloud business through Azure OpenAI Service. At the time of the first investment, Gates reportedly warned Nadella that OpenAI, being a non-profit, might never deliver financial returns. Nadella acknowledged that skepticism in the TPBN interview, recalling Gates' words: "Yeah, you're going to burn this billion dollars." But Nadella believed in the long-term vision of responsible, human-centric AI. "We had a little bit of high-risk tolerance," he said. "We wanted to give this a shot." It's safe to say that Nadella's shot hit the bullseye. Microsoft now holds a 27% stake in OpenAI's for-profit business -- recently valued at around $135 billion -- and is considered the backbone of the company's AI infrastructure. As OpenAI undergoes a major restructuring, forming the OpenAI Foundation to oversee a new public benefit corporation, Microsoft's role in the AI ecosystem continues to grow. Despite facing its share of controversies -- including a recent lawsuit alleging misleading practices -- Nadella's clear stance on responsible AI has earned him widespread respect. Whether Bill Gates' warning was misplaced or simply a reflection of his cautious wisdom, one thing is undeniable: Satya Nadella's billion-dollar "burn" lit the spark for a new era in AI.

After Satya Nadella Revealed That Bill Gates Warned Him Against OpenAI Investment, Altman Says Microsoft 'Early Conviction' Led To Company's Rise - Microsoft (NASDAQ:MSFT)

On Friday, OpenAI CEO Sam Altman praised Microsoft Corporation (NASDAQ:MSFT) and its CEO Satya Nadella for their decisive early investment and unwavering support, saying the tech giant's conviction played a defining role in ChatGPT-maker's transformation into an artificial intelligence powerhouse. Microsoft's Early Bet On OpenAI Appearing on Big2Pod on Friday, Altman and Nadella spoke with Altimeter Capital CEO Brad Gerstner and discussed the origins and evolution of the partnership that helped shape the modern AI landscape. Microsoft first invested in OpenAI in 2019, putting up about $13-14 billion over several years. In return, the company now holds roughly 27% ownership of OpenAI on a fully diluted basis. Nadella reiterated that Microsoft's initial investment wasn't driven by financial expectations but by belief in OpenAI's mission and potential. He had also disclosed that Microsoft co-founder Bill Gates was not really in favor of investing in OpenAI initially. "I think you know Bill even said 'you're going to burn this billion dollars,'" Nadella recalled during an interview with TBPN. "We kind of had a little bit of high risk tolerance." See Also: AMD, Nvidia, Broadcom's Combined Value Surges 1000% In Just Three Years -- And Bulls Want More A Partnership Built On Vision And Trust Altman called the collaboration between the two companies "one of the great tech partnerships ever," acknowledging Microsoft's role as a key enabler of OpenAI's success. "Certainly without Microsoft, and particularly Satya's early conviction, we would not have been able to do this," he said, adding, "I don't think there were a lot of other people that would have been willing to take that kind of a bet given what the world looked like at the time." He added that when OpenAI began its journey, there was little certainty about how the technology would evolve. "We just had a lot of conviction in this one idea of pushing on deep learning and trusting that if we could do that, we'd figure out ways to make wonderful products and create a lot of value." Microsoft Deepens OpenAI Partnership With 27% Stake Valued At $135 Billion Microsoft's stock has surged nearly 21.72% over the past six months. Earlier this week, the company announced a new phase in its collaboration with OpenAI, converting its investment into a 27% ownership stake in OpenAI Group Public Benefit Corporation, valued at approximately $135 billion. The restructuring solidifies Microsoft's role as OpenAI's exclusive frontier model partner, granting it continued rights to the company's intellectual property and Azure API access until artificial general intelligence is independently verified. Nadella has previously noted that his relationship with Altman dates back to 2016, when the AI startup first adopted Microsoft's Azure cloud platform. As part of the new agreement, OpenAI has committed to an additional $250 billion in Azure cloud purchases, while Microsoft's intellectual property rights have been extended through 2032. According to Benzinga's Edge Stock Rankings, Microsoft ranks in the 97th percentile for Growth, reflecting its strong long-term fundamentals and robust investor confidence. Click here to see how it stacks up against industry peers. Read Next: After Google's $2.7B Acquisition Of Founders And Staff, This AI Startup Abandons Large Language Model Plans And Shifts Focus Away From Chatbots Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image via Shutterstock MSFTMicrosoft Corp$517.71-1.53%OverviewMarket News and Data brought to you by Benzinga APIs