Microsoft Corp is in talks to invest $10 billion into OpenAI, the owner of ChatGPT, which will value the San Francisco-based firm at $29 billion, online news publication Semafor reported on Monday, citing people familiar with the matter.

The funding includes other venture firms and deal documents were sent to prospective investors in recent weeks, with the aim to close the round by the end of 2022, the report said.

Microsoft declined to comment, while OpenAI did not immediately respond to Reuters' request for comment.

This follows a Wall Street Journal report that said OpenAI was in talks to sell existing shares at a roughly $29 billion valuation, with venture capital firms such as Thrive Capital and Founders Fund buying shares from existing shareholders.

OpenAI, founded by Tesla Inc CEO Elon Musk and investor Sam Altman, made the ChatGPT chatbot available for free public testing on November 30. A chatbot is a software application designed to mimic human-like conversation based on user prompts.

The Semafor report said the funding terms included Microsoft getting 75% of OpenAI's profits until it recoups its initial investment once OpenAI figures out how to make money on ChatGPT and other products like image creation tool Dall-E.

On hitting that threshold, Microsoft would have a 49% stake in OpenAI, with other investors taking another 49% and OpenAI's nonprofit parent getting 2%, the report said, without clarifying what the stakes would be until Microsoft got its money back.

Microsoft, which invested $1 billion in OpenAI in 2019, was working to launch a version of its search engine Bing using the AI behind ChatGPT, the Information reported last week.

The tech giant believes that Generative AI tools, such as ChatGPT and Dall-E, generated less than 1% of the world’s AI data sets in 2021, this can increase to 10% of all data generated by AI by 2025.

ChatGPT is based on OpenAI's GPT-3.5 model but has been taught to generate more conversational responses.

Unlike GPT-3, which merely predicts what text will follow any given string of words, ChatGPT attempts to communicate with users' inquiries more humanly. ChatGPT can engage with various topics, displaying significant advances over chatbots observed even a few years ago.