Microsoft Is Eating the AI Industry

Dear Artisan,

Microsoft is continuing its march towards eating the entire AI industry.

Yesterday, it announced the creation of Microsoft AI, a new unit focused on Microsoft’s consumer AI efforts. This unit will be led by two of the founders of Inflection AI, the startup co-founded by Reid Hoffman.

Let’s dive in.

The One Big Thing

Monopolies are the norm in the tech industry.

Going back to the days of IBM, to Intel, then to Apple, Microsoft, and Google, the network effects of information technology and the compounding effects of Moore’s Law make it such that, at a certain scale, it becomes nearly impossible for a tech behemoth to be taken down.

Then a new technology comes about, disrupts the existing order, and aims to build its own monopoly around the new technological moat it has found.

What does not normally happen, however, is for one of the existing monopolies to extend their monopoly into another era of technology, partner with or acquire most of the largest upcoming players in the space, and extend its run of dominance a few more decades.

That’s exactly what Microsoft is pulling off. Yesterday, it introduced Microsoft AI, a new business unit to lead the AI efforts of consumer-facing applications like Bing, Edge, and Office. They are bringing in Inflection CEO Mustafa Suleyman to lead the efforts in a role reporting directly to Satya Nadela.

As a part of this deal, Microsoft Azure users will have access to Inflection’s Pi model through a licensing agreement between the two entities. The revenue from this agreement will be used to repay investors of Inflection AI, one of whom is Microsoft.

My key takeaway here is that this era of technology is shaping up to look a lot like previous eras. While there is more of a streak of openness in this movement, with much of the underlying tech being open-sourced, we are headed towards a world where 3-5 major players own most of the talent, compute, and capital to operate at the cutting edge of the AI Renaissance.

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