Microsoft surprised the tech world on Tuesday by announcing it had hired Mustafa Suleyman, co-founder of $4 billion AI startup Inflection, to run Microsoft’s AI business. Karén Simonyan, another of his Inflection co-founders, will also be joining Microsoft, along with an unspecified number of staff.
Essentially, the $3.12 trillion cloud giant has acquired one of the most coveted teams of AI experts at a pivotal time in the evolution of the hot technology.
But this agreement – if this arrangement can be called that – is highly unusual. Inflection has secured a staggering $1.3 billion in funding in the last year alone, making it one of the hottest (and hyped, depending on how you look at it) startups among emerging AI companies. is ranked. As part of the deal, the company said it will move away from the consumer version of its Pi chatbot, which was launched less than a year ago. Also, according to Forbes, Microsoft has not acquired any equity in his Inflection AI, nor will the ownership of the intellectual property change.
To call this event “head-scratching” is an understatement.
There’s a lot to unpack here, from a potential conflict with Microsoft’s stake in OpenAI to Inflection co-founder Reid Hoffman joining Microsoft’s board of directors. Will this be the pin that bursts his AI bubble, or will this technology be operated by a select, well-funded few with computing power, until the US Department of Justice and Federal Trade Commission get involved? Will that happen?
Here are some of the key questions and highlights raised after Microsoft and Inflection’s most unusual announcement.
If this isn’t an acquisition, what is this deal?
The problem here is that Big Tech companies like Microsoft are currently under intense antitrust scrutiny. In January, the FTC announced it was opening an investigation into Microsoft’s $13 billion partnership with OpenAI, the company behind ChatGPT (the FTC is also considering investments between Amazon and Anthropic, and Google and Anthropic). announced).
Given government concerns about concentration of power in the AI market, it’s impossible to imagine Microsoft acquiring Inflection without facing regulatory challenges. So what exactly is the deal between the two companies on Tuesday? Acquisition? Microsoft’s press release describes this as an “organizational update” and says only that “several members” of his Inflection team, in addition to the two co-founders, will be moving to his Microsoft.
Microsoft has carried out this plan before, but it was never completed. When OpenAI’s Sam Altman was fired from the company in November, Microsoft CEO Satya Nadella extended a welcoming hand to the entire OpenAI staff, including Altman and other executives. He suggested that he continue working under Microsoft. This offer, which Altman accepted, was ultimately moot when he returned to the OpenAI throne. As many observers noted at the time, if Microsoft had succeeded in getting his entire OpenAI team on board, it could have effectively completed the acquisition of OpenAI without facing normal antitrust scrutiny.
Will such a move meet the approval of regulators, or will it be seen as a challenge that regulators will have no choice but to respond to? Stay tuned.
What does this say about the relationship between Microsoft and OpenAI?
It’s natural to wonder why Microsoft would want or need Suleiman’s AI expertise when it already has expensive partnerships with Altman and the OpenAI team. Speculation immediately swirled on Tuesday that the move signaled tensions in the partnership between Microsoft and OpenAI. Talks with Suleiman had been going on for months, according to Bloomberg, but Nadella on Monday spoke to OpenAI CEO Sam Altman about integrating Suleiman and his team into Microsoft. He said he was just telling him.
We don’t actually know what the current status of the relationship between Nadella and Altman is, but this move at least shows that Microsoft doesn’t intend to keep all of its AI eggs in Altman’s cage. There is. There were other signs as well. In February, Microsoft made a $16 million investment in Mistral AI, a French OpenAI competitor. Microsoft is also taking steps to develop its own low-cost generative AI products that don’t rely entirely on OpenAI technology, The Information reported in January.
Is this the beginning of the end for AI chatbots?
In news Tuesday, Inflexion announced that it will be moving away from its current development of the Pi chatbot and will instead focus on building custom chatbots for enterprise customers. Inflexion says the soon-to-be-extinct Pi is used by millions of people every week. But that’s clearly not enough in the crowded and expensive field of chatbots, many of which are based on expensive LLM models (training these models requires “eye-watering” levels of computing). (as OpenAI CEO Sam Altman once said) Said. )
Suleyman’s original vision for Inflection was very different from the “empathetic” AI chatbot called Pi that was brought to market in May. The original plan was to develop an AI “chief of staff” – a generative AI agent capable of handling numerous tasks – that could seamlessly manage both personal and professional aspects of life. Suleiman has repeatedly insisted he remains committed to creating this AI chief of staff, but his promises were tempered by warnings that it would require significant time and effort.
Ever since OpenAI announced ChatGPT in November 2022, the tech industry has experienced a collective frenzy for AI chatbots, with all kinds of bots with friendly names (Claude, Rufus, Poe, Grok, etc.) billions of dollars are being poured into it. The chatbot name has an event generator). In January, OpenAI launched his GPT store chock-full of bots. But how much differentiation and value can these bots actually offer? While the general concept of chatbots and co-pilots will probably never go away, Pi’s demise may mean that countless chats It may be a sign that the frenzy that gave rise to bots is actually crumbling.
Inflection co-founder Reid Hoffman joins Microsoft board
There’s another interesting aspect to the Microsoft and Inflection news. That means Inflection co-founder Reid Hoffman is a director on Microsoft’s board of directors.as luck It was reported in December that Hoffman is one of several venture capitalists, including Marc Andreessen, who sit on Big Tech’s boards and whose companies support There is a possibility of conflict due to AI startups that do
Hoffman previously served on OpenAI’s board of directors, but resigned to avoid a potential conflict of interest due to his investments in companies that utilize OpenAI’s software. However, Semafor reported that he was “personally dissatisfied” with being asked to step down from OpenAI’s board.
Had Microsoft acquired Inflexion, Mr. Hoffman undoubtedly would have been forced to refrain from involvement in the deal. But this is not an acquisition. Still, the move, which effectively eliminates Microsoft’s rival in consumer AI chatbots, raises questions about how the deal came about and the details of its terms.
After the article was published, Hoffman wrote on LinkedIn: “The agreement with Microsoft means all of Inflexion’s investors get a good result today, and we can expect good upside in the future.” he posted. It’s unclear whether “positive outcome” refers to the financial component of the trade for inflation investors. And while the deal calls for Microsoft to license some of Inflection’s technology, the future value of that technology appears to be diminished now that Inflection has lost key members of its team. .
