Microsoft Develops In-House AI Models to Reduce Dependence on OpenAI

Nadella Takes a Swipe at OpenAI, Calls It a Product Company, Not a Model Company

"We're a full-stack systems company, and we want to have full-stack systems capability." All may not be well between Microsoft and OpenAI. A new report suggests that Microsoft is building its own AI model to rival OpenAI. In a recent podcast, Microsoft chief Satya Nadella said that Microsoft doesn't need to build an LLM just to "prove a point". When asked why Microsoft still hasn't built its own foundational models, he said that Microsoft sees itself as a full-stack company and LLMs are just a part of it. "We're a full-stack systems company, and we want to have full-stack systems capability," he said, adding that the company focuses on integrating models into broader systems and products. He added that Microsoft has a "long-term stable relationship" with OpenAI and retains important IP rights through their partnership, and the company has built systems, tools, and products around OpenAI's models rather than just relying on the models themselves. "I do believe the models are becoming commoditised, and in fact, OpenAI is not a model company, it is a product company," he said. To some extent, Nadella is right. He is worried that OpenAI, by releasing products, is creating direct competition. That explains why, whenever OpenAI releases new products, Microsoft integrates them into Copilot. For instance, the Copilot app recently announced unlimited access to Voice and Think Deeper, powered by OpenAI's o1 model. OpenAI's revenue for 2024 was approximately $3.7 billion, with significant growth projected for 2025, reaching around $11.6 billion. Meanwhile, Microsoft recently informed shareholders that it is generating over $13 billion in annualised AI revenue. Nadella asserted that under Microsoft's AI chief Mustafa Suleyman's leadership, Microsoft has built the Phi models. Since the tech giant has been trying to be less dependent on OpenAI, it recently launched Phi-4-multimodal and Phi-4-mini, the latest additions to its Phi family of small language models (SLMs). The Phi-4 multimodal model supports applications such as document analysis and speech recognition. On multimodal audio and visual benchmarks, it surpasses Google Gemini 2 Flash and Gemini 1.5 Pro. Microsoft claims that it is comparable to OpenAI's GPT-4o. Suleyman reportedly clashed with OpenAI leadership over access to technical details, prompting the company to explore alternatives and invest in in-house innovation. Last fall, during a video call, Suleyman pressed OpenAI to share documentation on its o1 model's "chain of thought" reasoning. OpenAI's refusal sparked a heated exchange with senior leaders, including then CTO Mira Murati, before the call abruptly ended, the report said. Fast forward to today, AI researchers in Suleyman's team believe they have made significant progress on the second of their two key priorities. Under the leadership of Suleyman's deputy, Karén Simonyan, the team has successfully trained a series of Microsoft models called MAI. These models reportedly perform at a level comparable to top models from OpenAI and Anthropic on widely recognised benchmarks. First reported last year, MAI -- internally referred to as MAI-1 (possibly Microsoft AI-1) -- is being developed by the company and is around 500 billion parameters in size. The company is also training reasoning models that use chain-of-thought techniques to rival OpenAI's offerings. Microsoft is considering releasing the MAI models later this year as an API, allowing developers to integrate them into external applications, a move that would position Microsoft in direct competition with OpenAI's API services. Salesforce chief Marc Benioff recently commented that OpenAI chief Sam Altman and Suleyman are not exactly "best friends". Notably, Microsoft first offered the AI chief role to Altman following his dramatic firing from OpenAI in 2023. To further hedge its bets, Microsoft has begun testing models from OpenAI competitors, including Anthropic, xAI, DeepSeek, and Meta, as potential replacements for OpenAI in its Copilot tools, which are integrated into products like Windows and Edge. Notably, Microsoft recently announced that distilled versions of the DeepSeek-R1 models, the 7 billion and 14 billion parameter variants, will be available on the Copilot+ PCs. His comments come after recent reports surfaced that OpenAI is planning to shift its entire workload to Project Stargate, leaving Microsoft Azure. Not to forget that Microsoft is no longer OpenAI's exclusive cloud partner. In a recent blog, OpenAI announced a new large-scale commitment to Azure, which will continue supporting all its products and model training. However, the agreement now allows for more flexibility. Instead of exclusivity, Microsoft has a right of first refusal on any new capacity OpenAI wants to add. This means Microsoft gets the first chance to match any other cloud provider's offer before OpenAI can move forward with them.

Microsoft developing AI reasoning models to compete with OpenAI, The Information reports

March 7 (Reuters) - Microsoft (MSFT.O), opens new tab is developing in-house artificial-intelligence reasoning models to compete with OpenAI and may sell them to developers, The Information reported on Friday. The company has begun testing out models from xAI, Meta (META.O), opens new tab and DeepSeek as potential OpenAI replacements in Copilot, according to the report. Microsoft and OpenAI did not immediately respond to Reuters' requests for comment. Reuters reported exclusively in December that Microsoft has been working on adding internal and third-party AI models to power its flagship AI product Microsoft 365 Copilot, in a bid to diversify from the current underlying technology from OpenAI and reduce costs. Reporting by Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Microsoft's AI unit aims for self-sufficiency, develops new models - The Information By Investing.com

Investing.com -- Last fall, Mustafa Suleyman, the head of Microsoft's in-house artificial intelligence unit, expressed dissatisfaction with OpenAI's lack of documentation on how its latest model, o1, worked, according to a report from The Information. Suleyman's role at Microsoft (NASDAQ:MSFT), which started a year ago, is twofold. He is responsible for maintaining the partnership with OpenAI, through which the two companies share AI research and development information. Additionally, he is tasked with guiding Microsoft towards AI self-sufficiency, reducing reliance on OpenAI's technology for most of Microsoft's AI products. AI researchers in Suleyman's unit believe they have made significant progress towards the second goal, the report noted. A team led by Suleyman's deputy, Karén Simonyan, has completed the training of a new set of Microsoft models, referred to as MAI internally. These models have reportedly performed nearly as well as leading models from OpenAI and Anthropic on commonly accepted benchmarks. The team is also training reasoning models that could compete directly with OpenAI's models, using chain-of-thought techniques to think through problems before solving them. Microsoft is considering releasing the MAI models later this year as an application programming interface, which will allow outside developers to integrate the Microsoft models into their own apps. This move would bring Microsoft's models into direct competition with similar offerings from OpenAI and other AI labs. Under Suleyman's guidance, Microsoft has also been testing models from OpenAI's competitors to power Copilot, a suite of AI tools built into Windows, the Edge web browser, and other Microsoft products that currently run on OpenAI's technology. These tests include models from Anthropic and Musk's xAI, as well as open-source models from DeepSeek and Meta Platforms (NASDAQ:META). Suleyman stated that Microsoft is now using models from major labs, including all open-source models, for experimentation. However, the success of his efforts to achieve more self-sufficiency for Microsoft in AI remains uncertain. While Simonyan's team has celebrated the performance of the MAI models internally, they have not yet been released publicly, nor has Microsoft made them widely available within the company. The development of the MAI models took nearly a year due to technical setbacks, strategy shifts, and the departure of key personnel who disagreed with Suleyman's management and technical approach. During this period, OpenAI trained and published several batches of advanced models. Suleyman is focused on preparing Microsoft for AI self-sufficiency in the coming decade, rather than short-term results.

OpenAI's Transparency Problem : Why Microsoft is Seeking New AI Allies

It's no secret that partnerships in the tech world can be as complex as the innovations they produce. For OpenAI and Microsoft, two giants at the forefront of artificial intelligence, their collaboration was once heralded as an innovative alliance. But as the AI landscape becomes more competitive and the stakes grow higher, cracks in their relationship are beginning to show. From disagreements over transparency to diverging goals, the once-synchronized vision of these two companies now seems to be pulling in opposite directions. If you've ever worked on a team where conflicting priorities made collaboration feel more like a tug-of-war, you'll understand the challenges they're facing. At the heart of this tension lies a fundamental question: how do you balance collaboration with independence in a field where innovation thrives on both? For Microsoft, the answer seems to involve exploring new paths -- building its own AI models, partnering with competitors, and even leaning into open source solutions. Meanwhile, OpenAI's reluctance to share certain proprietary details has left Microsoft questioning the reliability of their partnership. These dynamics don't just highlight the growing pains of two industry leaders -- they also reflect broader trends shaping the future of AI. So, what does this mean for the future of their partnership, and how might it reshape the AI landscape as we know it? Transparency has emerged as a major issue in the relationship between OpenAI and Microsoft. OpenAI's reluctance to share critical details about its AI models, such as the underlying reasoning processes of its "01" model, has caused frustration within Microsoft. For a company like Microsoft, which integrates AI into flagship products like Copilot, having a clear understanding of how these models function is essential. This knowledge is crucial for making sure the reliability and trustworthiness of its AI-powered solutions. Without it, Microsoft faces significant challenges in optimizing and troubleshooting its systems, potentially compromising the quality of its offerings. This lack of transparency has intensified Microsoft's desire to take greater control of its AI strategy and reduce its dependence on OpenAI. In response to these transparency challenges, Microsoft has accelerated its efforts to develop proprietary AI models. The company is investing heavily in its own large-scale systems, such as "MA1," to compete directly with OpenAI's GPT models. However, progress has been slower than anticipated due to technical hurdles and internal disagreements within Microsoft's AI division. Despite these obstacles, the company remains committed to achieving greater independence. By building its own AI capabilities, Microsoft aims to gain more control over its technology, reduce reliance on external partners, and mitigate risks associated with depending on a single provider. Here is a selection of other guides from our extensive library of content you may find of interest on OpenAI-Microsoft Partnership. Microsoft is diversifying its AI strategy by exploring partnerships with other companies and using open source platforms. Competitors such as Anthropic, DeepMind, and Meta are being considered as potential collaborators, offering Microsoft additional options for enhancing its AI products. Open source platforms, which provide greater flexibility and transparency, are also becoming a key focus within Microsoft's AI initiatives. This approach reflects a broader industry trend, where companies aim to balance proprietary innovation with open source collaboration to meet diverse customer needs. By pursuing these alternatives, Microsoft is positioning itself to remain competitive in a rapidly evolving market. The competitive landscape in AI is becoming increasingly intense, with OpenAI facing growing pressure from both established players and emerging platforms. Microsoft's diversification efforts could weaken OpenAI's market dominance, especially as other companies develop comparable or superior technologies. The competition extends beyond technical capabilities, encompassing factors such as customer trust, pricing, and the ability to deliver tailored solutions. For OpenAI, maintaining its leadership position will require addressing transparency concerns and demonstrating the unique value of its models. As the AI market grows more crowded, the ability to adapt and innovate will be critical for staying ahead. Microsoft's strategy is heavily influenced by the growing demand from businesses for greater flexibility and choice in AI solutions. By offering a mix of proprietary, open source, and third-party models, Microsoft aims to provide tools that can be customized to meet specific business needs. This modular approach aligns with a broader industry shift toward adaptable AI systems. In contrast, OpenAI's reluctance to fully embrace this model may limit its appeal to businesses seeking more customizable and transparent solutions. As customer expectations evolve, companies that prioritize flexibility and responsiveness are likely to gain a competitive edge. Microsoft's AI division, led by Mustafa Suleyman, has faced internal challenges that have slowed progress on some of its most ambitious projects. Reports of criticism and disagreements within the team have highlighted the difficulties of balancing innovation, competition, and collaboration in a rapidly changing field. These leadership hurdles underscore the complexities of steering a major technology company through the evolving AI landscape. For Microsoft, overcoming these challenges will be essential to achieving its long-term goals in AI development. The evolving dynamics between OpenAI and Microsoft provide valuable insights into the broader challenges facing the AI industry. Partnerships in this space require a delicate balance between collaboration and the need for independence and proprietary innovation. The tensions between these two companies serve as a case study in navigating these competing priorities. As the industry continues to expand, success will depend on a company's ability to adapt, innovate, and maintain transparency and trust. For both OpenAI and Microsoft, the stakes are high as they strive to shape the future of AI while addressing the challenges of competition, customer demands, and internal leadership.

Microsoft developing AI reasoning models to compete with OpenAI: Report

The company has begun testing out models from xAI, Meta and DeepSeek as potential OpenAI replacements in Copilot, according to the report.Microsoft is developing in-house artificial intelligence reasoning models to compete with OpenAI and may sell them to developers, The Information reported on Friday. The company has begun testing out models from xAI, Meta and DeepSeek as potential OpenAI replacements in Copilot, according to the report. Microsoft and OpenAI did not immediately respond to Reuters' requests for comment. Reuters reported exclusively in December that Microsoft has been working on adding internal and third-party AI models to power its flagship AI product Microsoft 365 Copilot, in a bid to diversify from the current underlying technology from OpenAI and reduce costs.

Report: Microsoft Considering AI Models to Replace OpenAI's in Copilot | PYMNTS.com

The tech giant is also training models that could compete directly with OpenAI's, both for use in Copilot and for sale to outside developers who could add them to their own apps, Reuters reported Friday (March 7), citing a paywalled article from The Information that cited unnamed sources. Microsoft has completed training of a family of models that perform nearly as well as OpenAI's leading models on commonly accepted benchmarks, according to the report. Microsoft did not immediately reply to PYMNTS' request for comment. Reuters reported in December that Microsoft was considering powering Copilot with in-house and third-party models, according to the report. Microsoft is a major backer of OpenAI and benefited from its early partnership with the company but has been looking to diversify its technology and reduce its costs, the report said. It was reported in August that Microsoft added OpenAI to its list of competitors in its fiscal 2024 report. Microsoft counts OpenAI among its competitors in the search and news advertising fields, along with Google and various social media platforms. While the relationship between the two firms has been critical -- with Microsoft turning to OpenAI for help in building AI systems, while also giving the small company financial backing to the tune of $13 billion -- the companies' desire to tap a greater share of the AI market put them at odds. Microsoft disclosed in a January blog post that it would no longer be OpenAI's exclusive cloud provider for its AI models, and instead would have the right of first refusal to host OpenAI's AI workloads in Azure. This marked a change in their 2019 agreement, when Microsoft became OpenAI's exclusive cloud provider after investing $1 billion in OpenAI, PYMNTS reported at the time of the blog post. The investment was also three years before ChatGPT and generative AI took the world by storm. At the same time, the blog post said Microsoft would retain the exclusive rights to OpenAI's application programming interface (API), which is how most companies access and integrate the startup's AI models into their own applications, products or services.

Microsoft's Relationship With OpenAI Is Not Looking Good

The major investor in OpenAI has been looking to cut ties as the two companies start looking more like competitors. We are receiving more evidence that Microsoft is looking to split with OpenAI. A new report from The Information says Microsoft is developing its own in-house reasoning models to compete with OpenAI and has been testing models from Elon Musk's xAI, Meta, and DeepSeek to replace ChatGPT in Copilot, its AI bot for the workplace. The development would have been unheard of only a year or two ago as Microsoft plowed billions of dollars into the AI darling and inked a deal that seemed to tie the two together inextricably for years to come. But there have already been whispers in recent months that Microsoft has been interested in loosening its reliance on OpenAI, in part out of concern over ChatGPT's price and speed. Microsoft Copilot has thus far received poor reception in enterprises due to its high cost and limited results. It can be useful at completing some easier tasks, like placing prepared text into a slideshow. Limiting a chatbot to a fixed dataset can often yield better results than one searching the open web, but language models still create a lot of errors that require manual review and correction that can be easy to overlook when using a chatbot. Microsoft, in January, decided to let OpenAI out of a contract that required it to use Azure for all its hosting needs. The startup recently announced an ambitious $500 billion plan (or $100 billion initially) to open massive new data centers with Oracle and SoftBank, a sign that Microsoft was unwilling to provide more resources. One interesting wrinkle in the whole story is that, as part of its investment in OpenAI, Microsoft retains the right to use the startup's intellectual property. The Information story says, however, that OpenAI has been unwilling to turn over documentation explaining how it built its o1 reasoning model: Last fall, during a video call with senior leaders at OpenAI and Microsoft, [Mustafa] Suleymanâ€"who leads Microsoft's in-house artificial intelligence unitâ€"wanted OpenAI staffers to explain how its latest model, o1, worked, according to someone present for the conversation and two other Microsoft employees who were briefed on it. He was peeved that OpenAI wasn't providing Microsoft with documentation about how it had programmed o1 to think about users' queries before answering them. It seems that both sides understand that the two partners are quickly becoming competitors. Perhaps Microsoft CEO Satya Nadella overestimated how much control it would have over OpenAI. During an interview in late 2022, Nadella questioned why Microsoft would develop its own foundational models when it can just use those from OpenAI. It seems the tune has changed since OpenAI CEO Sam Altman appeared at the White House to announce his new infrastructure deal with Oracle. Microsoft is reportedly planning on selling access to its in-house reasoning model, called MAI, to other developers, directly encroaching on OpenAI's space. It makes sense that Microsoft would want to detach from OpenAI. If they are going to remain independent companies, and artificial intelligence is going to be the next major platform shift, as some believe, Microsoft has an interest in controlling the technologies and writing its own destiny. OpenAI is currently a non-profit but has been working for some time to convert into a for-profit entity so it can raise more cash and presumably break free from obligations of a non-profit to operate solely in the public interest. In a sense, Nadella and Microsoft are making strategic bets and strategically hedging in order to capture the value of the AI boom wherever possible. Maybe Microsoft's models win; maybe OpenAI's do. Or maybe DeepSeek, the open-source model from China, is the future of models, and all that matters is the application layer, where Microsoft dominates in enterprise. The company is clearly not going to take any chances and instead place a lot of chess pieces on the board.

Microsoft reportedly ramps up AI efforts to compete with OpenAI

Microsoft is accelerating its push to compete with OpenAI, its longtime collaborator, by developing its own powerful AI models and exploring alternatives to power products like Microsoft's Copilot bot. Microsoft has developed its own AI "reasoning" models comparable to models like OpenAI's o1 and o3-mini, the The Information reports. OpenAI is said to have refused Microsoft's requests for technical details about how o1 works -- stoking tensions between the firms. Microsoft has also developed a family of models called MAI that are competitive with OpenAI's own, Bloomberg reports, and is reportedly considering offering them through an API later this year. Parallel to those efforts, Microsoft is said to be testing alternative AI models from xAI, Meta, Anthropic, and DeepSeek as possible replacements for OpenAI technology in Copilot. Microsoft, which has invested around $14 billion in OpenAI to date, has looked to hedge its bets in a number of ways, including hiring DeepMind and Inflection co-founder Mustafa Suleyman to lead the tech giant's AI efforts.

Microsoft Reportedly Training AI Reasoning Models to Compete With OpenAI

Microsoft 365 Copilot currently uses OpenAI's advanced AI models Microsoft is developing in-house artificial intelligence reasoning models to compete with OpenAI and may sell them to developers, The Information reported on Friday, citing a person involved in this initiative. The Redmond, Washington-based company, a major backer of OpenAI, has begun testing out models from xAI, Meta and DeepSeek as potential OpenAI replacements in Copilot, according to the report. Microsoft has been looking to reduce its dependence on the ChatGPT maker, even as its early partnership with the startup put it in a leadership position among Big Tech peers in the lucrative AI race. Reuters reported exclusively in December that the company has been working on adding internal and third-party AI models to power its flagship AI product Microsoft 365 Copilot to diversify from the current underlying technology from OpenAI and reduce costs. When Microsoft announced 365 Copilot in 2023, a major selling point was that it used OpenAI's GPT-4 model. According to The Information report, Microsoft's AI division, led by Mustafa Suleyman, has completed the training of a family of models, internally referred to as MAI, which perform nearly as well as the leading models from OpenAI and Anthropic on commonly accepted benchmarks. The team is also training reasoning models, which use chain-of-thought techniques -- a reasoning process that generates answers with intermediate reasoning abilities when solving complex problems -- that could compete directly with OpenAI's, the report said. Suleyman's team is already experimenting with swapping out the MAI models, far larger than an earlier family of Microsoft models called Phi, for OpenAI's models in Copilot, the report said. The company is considering releasing the MAI models later this year as an application programming interface, which will allow outside developers to weave these models into their own apps, the report said. Microsoft and OpenAI did not immediately respond to Reuters' requests for comment.

Inside Microsoft's plan to build a ChatGPT competitor

Microsoft is reportedly developing its own advanced AI reasoning models, known internally as 'MAI,' to decrease reliance on OpenAI and enhance its AI capabilities. The Information reports that these models are designed for complex reasoning and problem-solving, with the aim of matching or exceeding the performance of leading models from OpenAI. The company is experimenting with integrating the MAI models into products such as Microsoft 365 Copilot and is considering releasing them as an application programming interface (API) for external developers later this year. This could enable developers to incorporate Microsoft's AI functionalities into their own applications, potentially offering cost savings and increased flexibility compared to solely using OpenAI's technology. This initiative follows reports from December 2024, suggesting that Microsoft, despite investing $13.75 billion in OpenAI since 2019, is exploring alternatives to ChatGPT's AI model, particularly for its 365 Copilot. Initially, the Microsoft 365 Copilot -- launched in 2023 -- heavily featured OpenAI's GPT-4 model. However, Microsoft's strategy appears to be shifting for several reasons: to avoid monopolistic dependency, reduce costs, and improve operational speed. NASA's new tool uses Microsoft AI to unlock data for all Microsoft's AI division, under the leadership of Mustafa Suleyman, has completed training a family of models that reportedly perform comparably to leading models from OpenAI and Anthropic on common benchmarks. The team is specifically focusing on reasoning models utilizing chain-of-thought techniques, which allow for intermediate reasoning when addressing complex problems. In addition to the MAI models, Microsoft is testing AI models from xAI, Meta, and DeepSeek as potential replacements for OpenAI's technology in Copilot. This development coincides with the recent introduction of AI features in Microsoft 365 for Personal and Family subscription plans, which were previously available only through a separate Copilot Pro subscription requiring an additional fee of $20 per month. Earlier in 2024, Microsoft adjusted its partnership with OpenAI, moving away from exclusively providing cloud services. The revised accord maintains a 'right of first refusal' (ROFR) for Microsoft, allowing it the first opportunity to supply cloud resources to OpenAI, while giving OpenAI the liberty to explore services from other cloud providers like Oracle. This transition in the Microsoft-OpenAI partnership aligns with the announcement of the Stargate Project, a collaborative effort including OpenAI, Oracle, SoftBank, and Nvidia, which is expected to invest up to $500 billion in infrastructure development for next-generation AI models in the United States. Concurrently, Microsoft plans to invest $80 billion in AI-focused data centers and cloud initiatives in the fiscal year 2025, along with $3 billion allocated to projects in India. Suleyman's team has been progressing with the development of the MAI models, which are larger than an earlier series of Microsoft models called Phi. These models are designed to potentially replace OpenAI's models within Copilot. Microsoft is contemplating the release of the MAI models as an API later this year, allowing outside developers to incorporate these capabilities into their applications.

Copilot might soon get more Microsoft AI models, less ChatGPT presence

Table of Contents Table of Contents Steadily building its own stack Rivalry, and openness to rivals Microsoft is one of the early backers of OpenAI, and has repeatedly hawked products like Copilot by touting their access to the latest ChatGPT models. Now, it seems Microsoft is looking to push its own AI models in the popular software suite, while also developing a rival to OpenAI's reasoning models in the "GPT-o" family. As per The Information, employees at Microsoft's AI unit recently concluded the training of "a new family of AI model" that are currently in development under the "MAI" codename. Internally, the team is hopeful that these in-house models perform nearly as well as the top AI models from the likes of OpenAI and Anthropic. Recommended Videos Under the leadership of its AI chief, Mustafa Suleyman, Microsoft is launching this initiative to trim down its dependence on OpenAI and develop its own AI stack for Copilot applications. The developments are not surprising. Steadily building its own stack In the last week of February, Microsoft introduced new small language models called Phi-4-multimodal and Phi-4-mini. They come with multi-modal capabilities, which means they can process text, speech, and vision as input formats, just like OpenAI's ChatGPT and Google's Gemini. These two new AI models are already available to developers via Microsoft's Azure AI Foundry and third-party platforms such as HuggingFace and the NVIDIA API Catalog. In benchmarks shared by the company, the Phi-4 model is already ahead of Google's latest Gemini 2.0 series models on multiple test parameters. "It is among a few open models to successfully implement speech summarization and achieve performance levels comparable to GPT-4o model," Microsoft noted in its blog post. The company is hoping to release its "MAI" models commercially via its Azure service. Rivalry, and openness to rivals Aside from testing in-house AI models for Copilot, Microsoft is also exploring third-party options such as DeepSeek, xAI, and Meta. DeepSeek recently made waves by offering a high performance benchmark at a dramatically lower development cost. It has already been adopted by numerous companies and recently claimed a theoretical cost-to-profit ratio of over 500% on a daily basis. Today, we are advancing our AI ambitions with the release of DeepSeek R1 7B & 14B distilled models for Copilot+ PCs via Azure AI Foundry. This is the next step on our journey to continue to make Windows the platform for AI, seamlessly integrating intelligence from the cloud to... pic.twitter.com/QaUYrlMIt6 — Pavan Davuluri (@pavandavuluri) March 3, 2025 Aside from developing its own AI models to replace OpenAI's GPT infrastructure for Copilot, Microsoft is also reportedly working on its own reasoning AI models, too. This would pit Microsoft against OpenAI products such as GPT-o1 as well as Chinese upstarts such as DeepSeek, both of which offer reasoning capabilities. Apparently, the work on an in-house reasoning model has been expedited due to strained relationships between Microsoft and OpenAI teams over technology sharing. According to The Information, Suleyman and OpenAI have been at odds over the latter's lack of transparency regarding the intricate workings of its AI models such as GPT-o1. Reasoning models are deemed to be the next frontier for AI development, as they offer a more nuanced understanding of queries, logical deduction, and better problem solving capabilities. Microsoft also claims that its Phi-4 model delivers stronger language, mathematical, and visual science reasoning chops.