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Open AI is making a big bet on compute power being the answer to the limitations of AI in a move that I think will fail, but completely explains why Microsoft was willing to throw $1bn at this project.

Since Microsoft’s (MSFT) purchase of the most expensive lottery ticket in history, Open AI has disclosed that it will spend the proceeds on building a massive supercomputer with the aim to build a human brain-sized model.

Open AI is of the opinion that “the most benefits will go to whoever has the biggest computer,” meaning that it intends to spend almost all the money it has raised on compute power. The deal that it has cut with Microsoft states that this compute will be built with Azure, meaning that a good portion, if not the majority, of the money invested will come back to Microsoft in the form of revenues for Azure. When this is taken into consideration, one can now understand why a normally prudent company would make such a large and very risky investment in something that is completely unproven.

Rather than buying a lottery ticket, Microsoft has purchased an option on whether this is the right way to solve the problems of AI and has done so at a price far less than $1bn. In effect, Microsoft has purchased a customer and will see a revenue boost whether this approach works or not substantially reducing the risk being taken.

However, I still think that this is the wrong approach.

Read why here:

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