Why Munster Thinks Timing Of Microsoft-Open AI's Expanded Deal Is A 'Smart Move' — Hint: It Has To Do With Google

Microsoft Corp. (NASDAQ: MSFT) confirmed on Monday that it has entered into the third phase of the long-term partnership with OpenAI, the creator of the ChatGPT chatbot, through a multi-year, multi-billion-dollar investment. The expanded partnership is meant to accelerate AI breakthroughs, the companies said. 

What Happened: This was a smart move for OpenAI to close the deal before Alphabet Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG) comes out with its version of ChatGPT, possibly before summer, Loup Fund’s Gene Munster said.

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The venture capitalist expects Google’s chatbot to be better with lesser mistakes and more real-time information than OpenAI’s, given the size of Google resources applied to AI over the past six years.

Why It’s Important: ChatGPT's competition may not hurt Google as the latter has the vision, money and user base to withstand the threat, Munster said in a note released last week.

Google declared itself as an AI-first company in 2017 and the Search business generates more than $60 billion in annual operating, allowing the company to splurge on developing a potent ChatGPT competitor, the analyst said. Also, Google scores over OpenAI with the massive user base it commands, he added.

If ChatGPT has to pose a real threat to Google, GPT-3 needs to be 10 times more powerful, Munster said.

Price Action: Microsoft closed Monday’s session up 0.98%, at $242.58, and Google parent Alphabet’s shares rallied 1.81%, to $99.79, according to Benzinga Pro data.

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