Microsoft's AI Strategy Shift: Embracing Diversity and Cost-Efficiency in the Face of New Competition

Microsoft's CEO on How AI Will Remake Every Company, Including His

Nervous customers and a volatile partnership with OpenAI are complicating things for Satya Nadella and the world's most valuable company. Satya Nadella arrived at the World Economic Forum in January ready to talk up his triumphs in artificial intelligence, when a dangerous threat emerged. A little-known Chinese startup named DeepSeek had just released an AI model that quickly became the talk of Davos, Switzerland. Nadella, the chief executive officer of Microsoft Corp., gathered his lieutenants to assess the out-of-nowhere competition. They set up a virtual war room on -- where else? -- Microsoft Teams to coordinate a response. The new model, DeepSeek-R1, could deliver results roughly on par with those of OpenAI at a fraction of the price. Computer processing that would cost $1,000 through OpenAI ran for just $36 through R1. Even crazier, DeepSeek made R1 open-source, meaning anyone could install versions of it for free if they had a powerful enough computer. "OpenAI has been so far ahead that no one's really come close," Nadella tells Bloomberg Businessweek. "DeepSeek, and R1 in particular, was the first model I've seen post some points."

Satya Nadella Once Bet Big On ChatGPT-Maker OpenAI -- Now He's Reportedly Embracing Rivals Like DeepSeek And Building Cheaper AI Models To Future-Proof Microsoft - Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL)

Microsoft Corporation MSFT CEO Satya Nadella was once OpenAI's biggest champion, having invested about $14 billion in the ChatGPT-parent. However, Nadella is now reportedly broadening the company's AI playbook. What Happened: Earlier this year, in January, Chinese startup DeepSeek surprised the world with its low-cost R1 model. This open-source platform reportedly offered ChatGPT-level performance but at a fraction of the cost. The model delivered computing results for $36 that would otherwise cost $1,000 via OpenAI. Naturally, it rattled investors and led to Nvidia Corporation's NVDA market cap dropping nearly $600 billion. Following this, Nadella quickly convened Microsoft's top AI executives on Teams to assess the threat. See Also: Microsoft To Cut 6,000 Jobs Globally Amid AI-Driven Shift, Says Changes Necessary To 'Best Position The Company For Success' "OpenAI has been so far ahead that no one's really come close," the Microsoft CEO told Bloomberg Businessweek. "DeepSeek, and R1 in particular, was the first model I've seen post some points." Interesting, Nadella didn't try to outpace DeepSeek, but embraced the model on Azure and offered it to Microsoft's customers. "Get it out," he recalled telling his team. The CEO is now of the opinion that OpenAI is just one player. He has pivoted to offering a range of models, including Microsoft's own and third-party options like Meta Platforms, Inc. META, OpenAI and players like Cohere, Mistral, Stability AI and DeepSeek. Although this isn't true in cases like Gemini, a subsidiary of Alphabet Inc.'s GOOG GOOGL Google, the report added. Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Nadella is also pushing for cost-efficient AI, with in-house models like MAI-2 that are cheaper to run than OpenAI's ChatGPT. As per the report, OpenAI CEO Sam Altman's temporary ousting from the AI startup in 2023 damaged its relationship with Microsoft. This is why, the Nadella-led company has been building its own AI models to avoid overreliance on OpenAI. "The relationship with OpenAI has to date been pretty amazing," Mustafa Suleyman, the head of Microsoft's consumer Copilot efforts, told the publication. "But this is a 50-year-old company that needs to be in an amazing place in 2030, 2035 and 2040." Why It's Important: Earlier this month, it was reported that ChatGPT-parent is planning to reduce the amount of revenue it shares with Microsoft by at least 50% by 2030. The two companies are also reportedly amid high-stakes negotiations, in which one major point of contention is the equity Nadella's company will get in the new OpenAI structure in return for its multibillion-dollar investment. Price Action: In the pre-market session on Friday, Microsoft shares have dropped by 0.044%, reaching $452.93, according to data from Benzinga Pro. Based on Benzinga Edge Stock Rankings, Microsoft has earned an impressive growth score of 91.54%. Click here to compare its performance with other major stocks such as Alphabet and Meta. Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: Cathie Wood Dumps Palantir As Stock Touches Peak Prices, Bails On Soaring Flying-Taxi Maker Archer Aviation Image Via Shutterstock GOOGAlphabet Inc$166.960.94%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum38.90Growth66.98Quality81.70Value52.50Price TrendShortMediumLongOverviewGOOGLAlphabet Inc$165.570.98%METAMeta Platforms Inc$643.00-0.14%MSFTMicrosoft Corp$453.13-%NVDANVIDIA Corp$135.680.63%Market News and Data brought to you by Benzinga APIs