AI: Microsoft's AI Backup Plan. RTZ #320
...Inflection acqui-hire an OpenAI Insurance policy
As I highlighted a few weeks ago, Microsoft absorbing Foundation LLM AI company Inflection into its AI fold represented ‘An Inflection point for Microsoft’, pun intended. At this early stage in the AI Tech Wave, companies big and small are building backup plans and redundancy in their plans to commercialize AI technologies at scale.
Microsoft has been at the tip of the spear amongst the big tech compaines (‘Magnificent 7’) in this effort, and investors have rewqrded CEO Satya Nadella’s proactive partnership with OpenAI, and its AI Copilot commercialization plans with almost a trillion dollars in added market cap over the last year and more. And rumblings of an extension of its OpenAI partnership with a multi-year, hundred billion dollar plus AI Supercomputer data center effort dubbed ‘Stargate’.
This is not to say that the Microsoft/OpenAI partnership has weaknesses. But especially after the governance crisis at OpenAI last November, Microsoft seems to have accelerated its backup and redundancy plans beyond OpenAI, especially after some pushback from Microsoft insiders. The Inflection move is a pointed step in that direction. The Information provides glimpses into how that evolved from Microsoft’s perspective, in “Behind the Marriage of Microsoft and (Inflection founder/CEO) Mustafa Suleyman”:
“Microsoft, too, has struggled to get the kind of viral adoption for its AI products that ChatGPT secured almost the moment it debuted. The company first launched its proprietary chatbot as Bing Chat in July 2023 but rebranded it as Copilot in September.”
“Last November, the dramatic near-implosion of OpenAI exposed the vulnerabilities of relying on a single company to provide foundational AI models. While Microsoft has remained staunchly committed to its partnership with OpenAI, which exclusively powers Microsoft’s first-party AI apps such as Copilot, it has also ramped up its own small-model development, and it continues to expand the catalog of models available through its Azure cloud platform.”
”This week, Microsoft made Cohere’s latest large-language model available on Azure, and last month the company made headlines with a splashy deal with French AI company Mistral. That deal did, however, prompt scrutiny from EU regulators, as concerns over the dangers of corporate consolidation in the AI space continued to grow back home as well.”
Indeed many AI moves by Microsoft and CEO Satya Nadella in recent months hint at some of divergence in alignment points with its OpenAI Partnership:
Microsoft’s Inflection AI, Mistral AI, and other competing LLM AI partnerships/investments and distribution agreements on its Azure data centers.
Microsoft AI Copilot features built across Microsoft Windows and Products, on top of ChatGPT/GPT with Bing and other Microsoft software resources.
Chief Allocater of incoming AI GPU chip allocation from Nvidia and others, for Microsoft vs Microsoft/OpenAI applications and services
Support of Microsoft AI Open source software to augment Microsoft AI offerings
OpenAI’s exclusive reliance on Microsoft Azure for AI data center infrastructure. While competing clouds from Amazon AWS/Nvidia, Google/Nvidia, Oracle Cloud/Nvidia and many others are building up substantial competing AI Compute capacity worldwide leveraging Nvidia DGX and other AI technologies from Meta and others.
Inflection investment/acqui-hire, AND former LLM competitor Mustafa Suleyman as head of Microsoft AI Research.
Competition with Microsoft’s much bigger enterprise salesforce (tens of thousands vs hundreds for OpenAI)
Competition with broader Microsoft software Bundling with other Microsoft enterprise software products and services
Competition with Microsoft ‘Copilot’ button on the majority of new Windows PCs and laptops worldwide.
Presumably lower revenue share of Microsoft sold bundled Copilot AI services vs OpenAI direct sales via APIs and subscriptions.
At the core, Microsoft’s Satya Nadella remain laser-focused on executing on its AI ambitions at scale. And to ‘make Google dance’ while doing it. The only other CEOs of the ‘Magnificent 7’ with similar steely-eyed determination of course include founder/CEOs like OpenAI’s Sam Altman, Meta’s Mark Zuckerberg, Nvidia’s Jensen Huang, and Tesla/X/xAI’s Elon Musk.
This is not to say that Amazon’s Andy Jassy, Apple’s Tim Cook and Google’s Sundar Pichai are not focused on AI. But there is a palpable set of AI ambitions that come through for Microsoft, OpenAI, Nvidia and Meta.
Inflection ingestion into Microsoft is an important ‘backup plan’ to note for Microsoft. 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)