TikTok, still battling a law that requires it to sell itself or face a ban in the U.S. over purported national security issues, has been spending $20 million a month to buy access to OpenAI's models through Microsoft's cloud service. 

The ties between Microsoft and OpenAI have been very clear from the start. While OpenAI's ChatGPT powers Microsoft's AI Copilot system, the big tech company just withdrew from having an observer position on OpenAI's board in an effort to show the two companies are separate. So there's intrigue about Chinese-owned TikTok's spending here--particularly since it makes up more or less 25 percent of the total cash Microsoft was raking in from this sector of its business, according to a report from the tech news site The Information. 

The site spoke to insiders who said TikTok was paying $20 million a month, at least up until March, and that Microsoft was generating about $83 million a month from this part of its business, or roughly $1 billion a year. We know that the social media platform is all about the algorithm--it's the secret sauce that makes the TikTok experience work, and is a central part of the battle over the anti-TikTok law--but what use would the global social media giant have for accessing ChatGPT AI tech through a Microsoft frontman?

News site The Verge explains that it might have to do with TikTok's efforts to develop its own large language model (LLM) system. In late 2023 the site found that TikTok had been "secretly" using OpenAI's AI system to develop its own version of an LLM chatbot. That approach was seen as a faux pas in the AI industry and a likely violation of OpenAI's own terms and conditions. Microsoft has the same policy too. Nevertheless, documents showed that TikTok parent company ByteDance was indeed up to this trick, and OpenAI then suspended ByteDance's account.

We know AI plays an increasing part of social media systems, via examples like Butterflies--a new system built around the idea of creating and chatting with AI-powered personas--and even Instagram itself. The Meta-owned platform just revealed its new AI Studio system, which allows anyone to build a custom AI chatbot that can perform some of your direct messaging activity. So, perhaps this is a move by ByteDance to make hay while the sun still shines, gaining AI expertise while it still can buy access, so it can build AI into TikTok--or to do the groundwork for a new AI-centric social media experience that it could use to fill the shoes of TikTok if it really does end up banned in the U.S. Whatever the case, there are implications for Microsoft, since if TikTok develops its own LLM, it wouldn't need to pay Microsoft so much.

The revelations about TikTok's AI spending also arrive as some critics publicly question the value of AI, asking if the current burst of generative AI tech and LLM chatbots are actually delivering real benefits or not. 

A new research note from Morgan Stanley covers a noteworthy example, reports Business Insider. A chief information officer of an unnamed pharmaceutical company canceled a contract to buy Microsoft's Copilot AI services, the note says. Previously, the company paid for six months of access to the Copilot upgrade to its well-known office productivity software--a pilot project for 500 employees. But the executive, referred to in the report only as "Greg," compared the AI-powered slide making tools to "middle school"-level presentations, and canceled the subscription, since it cost the company twice as much as an AI-free version of Microsoft's software without delivering meaningful value.