The AI Titan: Microsoft’s Billion-Dollar Bet on OpenAI and the Rise of TikTok

As a tech journalist, Zul focuses on cloud computing, cybersecurity, and disruptive technology in the enterprise industry. With expertise in moderating webinars and presenting content on video, Zul also has a background in networking technology.

In the realm of cloud services, Microsoft has distinguished itself by integrating OpenAI’s successful AI technology. This strategic move has significantly impacted various platforms, including TikTok.

TikTok’s AI-Powered Growth

According to internal financial documents, as of March 2022, ByteDance’s TikTok was spending nearly $20 million every month on OpenAI’s AI model services, which TikTok accessed through Microsoft. This substantial amount accounted for almost 25% of Microsoft’s total revenue in that sector. At the time, Microsoft’s annual revenue from this business was expected to hit $1 billion, or around $83 million per month.

However, this success comes with a risk: high customer concentration. While Microsoft is relying on AI in its work with TikTok, the latter company has also developed its own AI-related plans. ByteDance aims to create software that can generate dialogue and images, which could potentially make TikTok’s AI more competent than Microsoft’s, negatively impacting the growth of Microsoft’s cloud business revenue.

Diversifying the Clientele

To reduce this risk, Microsoft is trying to attract more corporate clients, such as Walmart and financial software provider Intuit. These companies pay millions of dollars monthly to access OpenAI’s models through Microsoft. For Intuit, this subscription is a hopeful sign since the company used to rent its servers from Amazon.

Beyond Azure OpenAI: Copilot and Other Services

Microsoft is also adopting a diversified strategy by utilising AI in a number of ways. Their cloud service does not just consist of Azure OpenAI; they also have a service named Copilot, through which they sell AI-powered writing, coding, and summarising features to existing Office 365, and other enterprise software customers.

Three months ago, CEO Satya Nadella mentioned that the subscription volume for Copilot had doubled, with major buyers including financial services.

The Impact of Major Customers

The success of Microsoft’s AI can be attributed to major customers like TikTok, which has significantly contributed to the company’s profits. Microsoft has also achieved success in pulling customers away from competitors like Google, Amazon, and Oracle. For instance, TikTok initially used the cloud services of these companies, but now spends money on using Microsoft’s cloud technology.

The Uncertain Future

However, some uncertainty still exists. It is unclear whether Walmart or TikTok use this technology to improve their own AI models. If they do, a share of their spending on Microsoft’s products will decrease once their technology matures. Although OpenAI prohibits using its technology to create competitive AI models, many customers still do so, and OpenAI appears to tolerate this practice.

Expanding the Clientele and Revenue Streams

In order to reduce the risk associated with a high customer concentration, Microsoft is working to increase both its clientele and sources of income. Microsoft has benefited greatly from OpenAI’s AI technologies, but the company is still highly reliant on big clients like TikTok. Microsoft must attract and retain more large clients to meet market expectations.

In the hopes that these investments will someday pay off, the corporation has put billions of dollars into OpenAI’s technologies and data centre servers.

Financial Performance and Future Prospects

Microsoft’s financial report was made public on Tuesday. It revealed a 29% increase in cloud revenue for the second quarter, which was less than anticipated by the market. This was followed by a more than 7% decline in Microsoft’s stock price, which impacted other tech stocks, such as Amazon, Datadog, and Snowflake. Despite the decline, Microsoft remains upbeat and anticipates a spike in Azure revenue the following year.

Additionally, Microsoft is selling a percentage of revenue from AI models directly to enterprises, with this year’s numbers unexpectedly surpassing those of Azure OpenAI services. Microsoft also generates billions in revenue annually by renting servers to OpenAI, allowing the startup to run ChatGPT and develop related technology, despite not having high profit margins from this.

Events and Webinars

Want to learn more about AI and big data from industry leaders? Check out

Top AI Tools to try:

1) Klap.app

Turn your videos into viral shorts! Unleash your creativity with Klap’s innovative features. Try it out today with a free trial video and elevate your content creation game. Ready to take it to the next level? Upgrade to Klap Pro for even more exciting possibilities.

2) Unriddle — Research Faster, Write Better!

Join over 400,000 researchers and students who trust Unriddle to streamline their information gathering process. Explore the AI assistant that helps you find, summarize, and understand information with ease. Elevate your research game with Unriddle’s innovative features today!

Subscribe for the latest news in AI tools and groundbreaking news. Don’t miss out!