eResearch |On June 22, 2019, OpenAI LP (“OpenAI”), an artificial intelligence (AI) research company, announced a US$1 billion partnership with Microsoft Corporation (NASDAQ: MSFT; LSE: 0QYP; DB: MSF), who will become OpenAI’s exclusive cloud infrastructure and services provider. OpenAI was founded in 2015 by Elon Musk, CEO of Tesla and SpaceX, and Sam Altman, OpenAI’s current CEO, though Musk left the board in 2018 due to conflict of interest with Tesla‘s AI development for autonomous vehicles.
OpenAI Inc. was created as a non-profit research lab with a vision to steer the direction that AI would take in business and society, ensuring that it is developed and used in an ethical, friendly, and harmless way. The Company initiated operations with US$1 billion pledged through Musk, Altman, and tech companies including Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ) and Infosys Ltd. (NYSE: INFY; NSE: INFY; DB: ADR).
In March 2019, due to high costs in large scale cloud computing and hiring AI talent, OpenAI Inc. announced a spin-off company called OpenAI LP, which was to act as a “capped-profit” company, placing a limit to profits with a maximum 100x return. Any profits in excess of 100x return will be passed on to the parent, non-profit company, which will allocate the capital as it sees fit.
Leveraging Microsoft’s partnership, OpenAI plans to: (i) integrate its products and services to run on Microsoft’s Azure platform; (ii) develop new AI functionalities for the cloud ecosystem; and, (iii) work towards research on Artificial General Intelligence, which is essentially an algorithm that is able to solve problems the way humans can. OpenAI’s products rely on computing large data sets in a trial and error methodology over a long timeline, which Microsoft’s cloud infrastructure can support, as cloud computing services account for 25% of OpenAI’s total operational expenses, according to filings from U.S. Internal Revenue Service.
Artificial Intelligence has become one of the most transformative technologies across all verticals of industries, as it is becoming the standard in making any business decision, by leveraging data and evaluating strategies in a calculated and risk-averse manner. Innovative applications for neural networks supported by scaled cloud capabilities have led breakthroughs in AI for numerous areas including: vision, speech, language processing, translation, robotic control, and gaming.
According to International Data Corporation (IDC), global cognitive and AI spending is forecasted to grow at a five-year CAGR of 37.3% to US$77.6 billion in 2022, compared with an estimated US$24 billion spent in 2018. Banking and retail sectors are expected to be the largest investors within the market with US$4 billion estimated spending in 2018, mainly on conversational AI applications and deep machine learning applications.
OpenAI initially started as a very collaborative and open company, with a vision for open-sourced collaboration with other institutions and researchers by making its patents and research open to public. Hopefully the Company maintains its vision even though Microsoft announced it will now become OpenAI’s preferred partner for commercializing new AI technologies.
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Microsoft Corporation (NASDAQ: MSFT; LSE: 0QYP; DB: MSF)
Headquartered in Washington, United States, Microsoft is a multinational technology company that focuses on manufacturing and licensing computer software, cloud computing, and consumer electronics. It is best known for its software products Microsoft Windows and Microsoft Office Suite. Microsoft currently trades at US$139.59 with a market capitalization of US$1.07 trillion.
Robo Global Robotics & Automation Index ETF (NYSE: ROBO)
Incorporated in the United States, ROBO is an ETF that includes 95 robotics, automation, and artificial intelligence companies. The largest investments included in the ETF include NVIDIA Corp. (NASDAQ:NVDA), HIWIN Technologies Corp. (TPE: 2049 TT), YASKAWA Electric Corp (TYO:6506), Oceaneering Intl Inc. (NYSE: OII), and Nabtesco Corp. (TYO: 6268). ROBO currently has a NAV of US$39.73 with net assets of US$1.3 billion and an expense ratio of 0.95%. Since inception in 2016, the stock price has increased 53.34% to US$38.91.
Global X Robotics & Artificial Intelligence Thematic (NASDAQ: BOTZ)
Incorporate in the United States, BOTZ is an ETF that includes 37 companies that are potential candidates to stand a significant benefit from the increased adoption and utilization of robotics and artificial intelligence. The largest investments included in the ETF include NVIDIA Corp. (NASDAQ:NVDA), Mitsubishi Electric Corp. (TYO: 6503), Keyence Corp.(TYO: 6861), Intuitive Surgical Inc. (NASDAQ: ISRG), and Fanuc Corp. (TYO: 6954). BOTZ currently has a NAV of US$20.34 with net assets of US$1.5 billion and an expense ratio of 0.68%. Since inception in 2016, the stock price has increased 36.19% to US$20.17.
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