Bill Gates cautioned Satya Nadella that Microsoft’s $1 billion investment in OpenAI in 2019 was likely to fail, the Microsoft CEO revealed in a recent interview. Nadella recounted the exchange during an appearance on the tech-focused YouTube channel TBPN, describing Gates’ skepticism stemming from OpenAI’s initial structure as a nonprofit organization.
“Remember this was a nonprofit, and I think Bill [Gates] even said, ‘Yeah, you’re going to burn this billion dollars,’” Nadella said. Despite the warning, Nadella and his team proceeded with the investment, viewing it as a crucial step in establishing Microsoft’s presence in the burgeoning field of artificial intelligence and bolstering the capabilities of its Azure cloud platform.
Nadella emphasized that securing internal approval for the substantial investment wasn’t overly difficult, despite the inherent risks. “It was not that hard to convince anyone that What we have is an important area,” he stated. “We kind of had a little bit of high risk tolerance, and we said, ‘We want to go and give this a shot.’”
The initial $1 billion investment ultimately paved the way for further financial commitments, totaling $13 billion, as Microsoft recognized the transformative potential of OpenAI’s technology. The partnership has yielded significant returns for Microsoft, with OpenAI’s restructuring in October resulting in a 27% stake in the company valued at approximately $135 billion. As of January, Microsoft reported that OpenAI contributed $7.6 billion to its net income.
The financial arrangement between the two companies has been further refined. OpenAI is now committed to purchasing $250 billion worth of Azure services over time, while a revised agreement allows OpenAI greater flexibility in sourcing compute power, potentially from providers beyond Microsoft, according to reporting by The Information.
Gates’ initial reservations about OpenAI appear to have diminished as the technology rapidly evolved. In a 2023 appearance on The Tonight Display Starring Jimmy Fallon, Gates predicted that advancements in AI would eventually automate most tasks currently performed by humans, stating, “There will be some things we reserve for ourselves…But in terms of making things and moving things and growing food, over time those will be basically solved problems.”
Microsoft declined to comment further on the details of the initial investment and Gates’ concerns when contacted by Fortune.