That is a huge assumption. The simplest explanation to me is that while they have larger language models they don't have a better product than chatGPT to release. I would think building that product is what this $400m represents.
The impressive thing with chatGPT to me is how well it understand what you want even with very sparse input. Even if it gives wrong answers it still feels like you are both on the same page. That seems like the secret sauce even if a larger language model would give more correct output. I wouldn't be shocked at all if Google doesn't have anything currently that feels the way chatGPT does when it comes to interaction and now they are racing to build exactly that.
The impressive thing with chatGPT to me is how well it understand what you want even with very sparse input. Even if it gives wrong answers it still feels like you are both on the same page. That seems like the secret sauce even if a larger language model would give more correct output. I wouldn't be shocked at all if Google doesn't have anything currently that feels the way chatGPT does when it comes to interaction and now they are racing to build exactly that.