AI: An Inflection point for Microsoft. RTZ #301

...an LLM AI Unicorn off the board

Truth sometimes is stranger than Fiction in the world of the AI Tech Wave. Quite a tale unfolded today. Maybe ChatGPT based on GPT 5 will tell a better one some day.

Not everyday that a board-member of a ‘Magnificent 7’ company (Microsoft), who is also the co-founder of a two year old ‘Unicorn’ Foundation LLM AI company (Inflection AI), gets his other co-founders hired by the company of which he’s on the Board. Get them appointed as the heads of the technology wave that added over a trillion dollars to the market cap of the aforementioned ‘Magnificent 7’ company,. That company’s market cap driven to over $3 trillion, by an extraordinary partnership with a competing company (OpenAI). Which itself kicked off the technology wave in question a little over a year ago. Oh, and the co-founder of the said two year old Unicorn, was also the co-founder of another Unicorn (Deepmind AI) racing to compete in the same technology wave that is now owned by an arch-competitor ‘Magnificent 7’ (Google/Alphabet).

In other words, Microsoft’s board member Reid Hoffman, who co-founded Inflection AI with Mustafa Suleyman two years ago, has now managed a transition of the key founding team at Inflection AI to Microsoft, where Mustafa is now the CEO of the Consumer Internet Copilot applications and services, reporting to Microsoft CEO Satya Nadella. Mustafa also co-founded Deepmind, with Demis Hassabis, who heads the AI effort for Deepmind owner Google.

And Mustafa now has the role that OpenAI founder and CEO Sam Altman and his team had for a weekend last November during the Operatic existential Governance battle barely five months ago. Things move faster than Fiction in the AI Tech Wave world indeed. And this tale has a lot of moving parts, as FT summarizes:

“Microsoft chief Satya Nadella’s bet on ChatGPT maker OpenAI gave the tech giant early ascendancy in the race to commercialise generative artificial intelligence. He has looked again at a a start-up to extend that advantage. “

A clear, straightforward telling of the tale can be had from Bloomberg in “Microsoft Hires DeepMind Co-Founder Suleyman to Run Consumer AI”:

“Microsoft Corp. has named Mustafa Suleyman head of its consumer artificial intelligence business, hiring most of the staff from his Inflection AI startup as the software giant seeks to fend off Alphabet Inc.’s Google in the fiercely contested market for AI products.”

“Suleyman, who co-founded Google’s DeepMind, will report to Chief Executive Officer Satya Nadella and oversee a range of projects, such as integrating an AI Copilot into Windows and adding conversational elements to the Bing search engine. His hiring will put Microsoft’s consumer AI work under one leader for the first time.”

“Inflection, a rival of Microsoft’s key AI partner OpenAI, is shifting to selling AI software to businesses but will continue operating its Pi consumer chatbot business for now. Karén Simonyan, Inflection’s co-founder, will join Microsoft as chief scientist for the new consumer AI group.”

“Inflection in June raised $1.3 billion in one of the largest funding rounds of Silicon Valley’s AI frenzy. That round valued the startup at $4 billion, a person familiar with the matter said at the time. Microsoft board member Reid Hoffman is a co-founder of the two-year-old startup, alongside Suleyman and Simonyan, and other investors include Microsoft co-founder Bill Gates, former Google CEO Eric Schmidt and Nvidia Corp.”

“In recent months, Inflection had talks with multiple investors about raising additional funds, according to people familiar with the conversations. The company declined to comment.”

Remember that some of the $1.3 billion invested by Microsoft and others was likely investments in return for Inflection AI infrastructure credits for Microsoft Azure cloud hosting and training/inference services. These ‘Boomerang Deals’ are par for the AI course these days as I’ve noted before, with the OpenAI/Microsoft $13 billion investment being a prime example. Funds from one corporate pocket going into the other pocket.

Furthermore, if one looks at the current Big Tech and Startup scene from the prism of the FTC’s stance at the moment on acquisitions small and large, this whole set of moves may just be an acquisition in multiple complex moves. As Stratechery points out:

“This is an acquisition in everything but name, just in the most convoluted way possible; the FTC can pat itself on the back, I guess, while Microsoft probably pays less than they might have otherwise, and every other would-be entrepreneur checks if their investors are sitting on any big company boards, and if they can make any irrational GPU purchases to make the relationship worth the trouble.”

So ‘Boomerang Deals’ and ‘convoluted’ Acqui-Hires in the face of FTC oversight, may be the current order of the day in tech and AI. Not to mention this being a Beefier ‘Plan B’ for Satya Nadella’s Microsoft vis a vis its OpenAI partnership. In all those contexts, this unexpected tale starts to get at many truths of the current world of tech and AI.

As I’ve outlined before, in these early days of the AI Tech Wave, the capital needed for the Foundation LLM ‘Big AI’ part of the investment ‘S’ curve continues to rise exponentially. That is particularly clear from the latest AI GPU and Infrastructure roadmap unveiled by key infrastructure provider Nvidia just yesterday.

Thus the game ahead on the ‘Big AI’ side is getting repositioned. The biggest players are consolidating for a bigger, slower, more capital-intensive race.

The ‘Small AI’ part of the race as I’ve discussed is kicking off in earnest this year, with other big players like Apple getting ready to make their moves soon.

It’s going to remain a ‘Truth is Stranger than Fiction’ world for the time being in AI for a while longer. Books, Movies, and ChatGPT will have to catch up. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)