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TikTok’s been a big spender for Microsoft, but not on Microsoft’s own AI models.
The social media giant has been spending $20 million monthly, as of March, to purchase OpenAI models through Microsoft, according to anonymous sources cited by The Information. TikTok’s big buys have made up about 25% of Microsoft’s AI revenue.
That’s a risk for Microsoft. TikTok parent company ByteDance is reportedly trying to build its own AI models. It’s even been using OpenAI’s technology to achieve those aims, The Verge reported last December. If successful, TikTok will no longer need OpenAI, nor Microsoft.
Such a conundrum isn’t new to the rapidly evolving artificial intelligence space. Nvidia, for example, faces risks similar to Microsoft’s. The AI chipmaker’s business is highly concentrated among behemoth tech companies. But those customers, including Microsoft, have used Nvidia’s hardware to build their own AI chips. That raises concerns for investors and analysts that, eventually, some of Nvidia’s customers will no longer need its products.
Hopefully for Microsoft, ByteDance will take its time developing its AI models. Just yesterday, Microsoft’s AI Cloud sales in its fiscal fourth-quarter earnings report failed to meet analysts’ high expectations. Microsoft shares fell 6% after the bell Wednesday. The company’s stock price recovered slightly Thursday morning, sitting around $418.
Other big-name customers that reportedly purchase OpenAI models through Microsoft include AT&T, Coca-Cola, Fidelity, Volvo, and Walmart. Other OpenAI corporate customers — such as Zoom, Klarna, and Salesforce — buy its software directly from the AI startup.