Microsoft’s Agreement With OpenAI Was Only the First Step. What It (Probably) Wants Is to Get Rid of the AI Company

Microsoft’s Agreement With OpenAI Was Only the First Step. What It (Probably) Wants Is to Get Rid of the AI Company

  • Microsoft’s colossal investment has allowed it to boost up its own AI platform.

  • While it relies on OpenAI for now, everything indicates it will eventually seek autonomy.

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Microsoft CEO Satya Nadella introducing PCs Copilot+ at Build 2024 conference

Satya Nadella quickly assumed his role as Microsoft’s CEO. His predecessor, Steve Ballmer, was in the spotlight for failing in both the browser and mobile wars. Nadella immediately set out to right the ship, and soon began to lighten the company's load and change its approach.

His strategy worked. Nadella's company has focused on mobile—albeit indirectly—and especially on the cloud, where Azure has become the dominant player. He didn't hesitate when it came to making decisions, whether that was acquiring companies or investing in new infrastructure.

Microsoft's data center investments and strategic alliances have a clear goal: winning the AI battle.

The numbers are astounding. Since Nadella’s arrival, Microsoft has invested over $180 billion in acquiring companies (Activision Blizzard for $68.7 billion, LinkedIn for $26.2 billion, and GitHub for $7.5 billion). In recent months, the company has also outlined its big bet for the future. Microsoft has invested more than $30 billion in new data centers, in addition to the $10 billion it has invested in OpenAI, with one goal in mind: winning the artificial intelligence battle.

For now, though, it needs help. Although the company has been working in the field for years, the rise of generative AI models caught Microsoft off guard like all the other big players. Nadella set out to solve the problem before anyone else and soon began pushing the adoption of OpenAI technology across all Microsoft products.

And that’s how we got here: Microsoft’s Copilots are flooding the sector, and the company consolidated its strategy at the recent Build 2024 conference by presenting the promising Copilot+ PCs. Artificial intelligence is Microsoft’s big bet to continuing to lead the technology battle in the coming years, and Open AI is the perfect candidate to help it do so.

At least for now.

According to The Wall Street Journal, several moves seem to make it clear that Microsoft’s vision is to eventually get rid of OpenAI. The company is building on the momentum of ChatGPT but is also taking small but important steps to launch its own LLMs to compete with those that now set the standard (GPT-4, Claude 3 Opus, Llama 3).

Microsoft introduced Phi-2 in December and followed it with Phi-3 in May this year. The company’s AI division is working hard Microsoft introduced Phi-2 in December and followed it with Phi-3 in May this year. The company’s AI division is working hard. Image | Microsoft

It's already begun charting this path with Phi-3, a model capable of running on mobile devices. Of course, it has plenty of competition. Google has Gemini Nano, Anthropic has Claude 3 Haiku, and Apple has its unspecified model, which will debut in Apple Intelligence on the iPhone 15 Pro/Max, among other devices.

But it's clear that Microsoft won’t be satisfied with that. A few months ago, it signed Mustafa Suleyman, one of the founders of DeepMind. Suleyman left Google (with some controversy) to co-found Inflection AI, which went on to create the Pi chatbot. Despite raising $1.3 billion, the company had yet to take off, so Microsoft’s offer to come and lead its AI division came at the right time.

Mustafa Suleyman Imagen | Collision Conf

Suleyman started leading Microsoft’s efforts to create its artificial intelligence models a few months ago. His work is taking shape, and with it, Microsoft already has its first GPT-4 competitor, MAI-1 (MicrosoftAI). The model is enormous (500B, 500 billion parameters). Still, interestingly, Microsoft’s representatives didn’t talk about it at the Build conference, which focused on Copilot+ PCs.

The freedom given to Suleyman is unusual: His team doesn’t communicate with Microsoft Teams, the company’s product, but with Slack. The AI division seems to be Microsoft’s darling, while hardware is losing significance.

Panos Panay, Microsoft’s former product lead, jumped ship in September 2023. According to the WSJ, there have been cuts to the budgets handled by this division and the one working on HoloLens, which canceled HoloLens 3 in February 2022.

However, everything about these efforts to compete with OpenAI and the other alternatives is currently unknown. Furthermore, Tte capacity of MAI-1 is uncertain, but it seems clear that Microsoft wants to follow in Apple’s footsteps. The company, led by Tim Cook, has an agreement with OpenAI, but it’s almost a testimonial because it uses ChatGPT as a last resource.

Microsoft seems to be looking at a similar future. For now, the OpenAI partnership is suitable for everyone: It gives its customers easy access to one of the best AI models on the market. The question, of course, is how long Microsoft’s love affair with OpenAI will last.

If everything moves forward as AI advances, it may not last long.

Images | Microsoft

Related | Copilot+ Explained: What It Is, What New Functions It Add to Windows 11, and What You Need to Use It

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