ChatGPT, the artificial intelligence-powered chatbot, has gained significant attention since its launch in late November last year. With its ability to answer questions and write copy in a conversational manner at rapid speed, the tool marks one of the biggest breakthroughs in AI.
Earlier this week, Microsoft announced that it is making a multi-billion dollar investment in OpenAI, the company behind ChatGPT. The additional funding is the third round of investment from Microsoft, with previous investments made in 2019 and 2021.
Commenting on the growing popularity of the chatbot, Chris Ford, head of growth equities at Sanlam Investments, said: “ChatGPT is based on OpenAi’s “GPT” NLP platform. It was launched in 2018 with 150mn parameters and has increased in complexity over the past five years to the point that GPT-3 now has 175bn parameters.
“ChatGPT uses “GPT3.5”, a tweaked version of GPT-3 with broadly similar capabilities. Microsoft paid OpenAI for exclusive access to commercialise GPT-3 in 3Q 2020 – it’s one of the key reasons that we own a position in MSFT in our fund. ChatGPT’s capabilities are very impressive, they are the best available at the moment, but not by a huge margin.”
According to Ford, AI is expected to permeate the entire economy over time and the firm expects Microsoft’s products and services to be deeply imbued with AI. However, Ford notes that the impact on Google’s search business is a “more nebulous” issue.
Ford continued: “ChatGPT has the headlines at the moment but it is not long since Google’s leading edge Natural Language Processing was in the zeitgeist. These things tend to leapfrog one another and so far it has paid to stand back a bit and try and see the big picture which is, of course, that AI is getting better and better and becoming more useful. It’s too soon to declare GPT and Microsoft to be the winners.”
Ford also points to the higher costs of GPT. Research from Morgan Stanley showed the cost per Google search was $0.005, while the cost per GPT3 query was between $0.03 and $0.14.
Ford said: “This doesn’t matter when ChatGPT is being used in relatively small scale, but it really matters if ChatGPT were to be used at scale. If ChatGPT were to be deployed at great scale, and if it were to be successful in displacing Google search somewhat, the graphics chip company nVidia could be well placed to benefit in our view.”
Google’s advertising business is currently experiencing its first proper cyclical downturn, albeit on a much lower scale than that of META or ROKU.
Ford added: “It’s pretty easy to throw mud in Google’s direction at the moment and we expect that some of it will stick. With the stock trading at circa 12.5x PE, and with huge optionality ahead, it earns its place in our portfolio, but not at the weight it enjoyed in previous times.”
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