Microsoft’s Satya Nadella now has a new best friend, Mustafa Suleyman, and it ain’t Sam Altman anymore. A new drama is unfolding in the heart of Silicon Valley as Inflection AI co-founder joins the big tech to run their AI show internally, leaving the startup stranded. 

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In a long-overdue move for Nadella in the well-orchestrated 4D chess, he brought in InflectionAI co-founders Suleyman and Karén Simonyan to lead the newly formed Microsoft AI division and focus on “consumer AI”. Suleyman is joining as the CEO, a position Nadella had offered to Sam Altman in November 2023, when OpenAI fired him. Simonyan joins as the chief scientist. 

Unlike its competitors, Microsoft has historically relied on partnerships and acquisitions to bolster its presence in the AI space. 

While companies like Google, Apple, and NVIDIA have invested heavily in internal research teams, yielding proprietary products such as DeepMind’s Gemini and Gemma, MM1, and NVIDIA’s groundbreaking developments showcased at GTC 2024, Microsoft’s approach has been more decentralised.

The lack of significant proprietary products emerging from Microsoft’s internal teams may have presented challenges for Nadella in meeting the expectations of stakeholders and customers. 

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Despite its extensive startup investment portfolio, Microsoft’s radio silence on products could have hindered its ability to compete effectively in the market. While Microsoft Copilot (formerly Bing Chat) is one of the company’s most popular products, it combines the company’s Prometheus model and OpenAI’s GPT-4 LLM. 

The Caring ‘Microsoft’ 

Nadella’s plan for a separate division focusing solely on AI is not new. He has always been looking for the “perfect” candidate to lead it. When Altman was fired in November last year, he swooped in to hire him as the CEO of this new AI division along with Greg Brockman. Now, he has basically brought Mustafa in his position. 

OpenAI is Microsoft’s first kid with the first investment going back to 2019. According to informed sources, only a fraction of Microsoft’s $10 billion investment in OpenAI has been directly given to the startup. Instead, a significant portion of the funding, distributed in instalments, is tied to cloud computing purchases rather than cash.

The company was the lead investor in Inflection AI’s last funding round in June 2023 where it raised $1.3 billion to develop “more personal AI”. Similarly, it has invested in SF-based AdeptAI, which is barely a year old now. 

The most recent addition to Microsoft’s portfolio is the multi-year partnership with French AI startup Mistral AI, which focuses on three core areas: supercomputing infrastructure, scale to market, and AI research and development. Through partnerships with major giants like Databricks to Snowflake, Mistral has threatened the OG influential startups like OpenAI, Anthropic and so on.

Not just startups, Microsoft even became Meta’s “preferred partner” for serving Llama 2. 

So, Microsoft’s Azure platform is now “diversifying” its offerings beyond what it previously provided in partnership with OpenAI, as suggested by Bindu Reddy, the founder of AbacusAI. Previously, Azure had collaborated with OpenAI to provide access to GPT models. Now, with deals like the one with Mistral and the pivot of Inflection AI, Azure is expanding its AI offerings independently. 

This suggests that Microsoft and OpenAI may eventually become competitors rather than collaborators in the future.

Alongside the co-founders, many Inflection employees are also joining the AI division of Microsoft.  Many are considering this move by MSFT to be both “genius and evil” because instead of acquiring the startup outright, the company poached the crème de la crème talent from these startups, which is often considered the key to their success. 

Source: Bojan Tunguz on X

On one hand, it allows Microsoft to gain access to top talent and innovative ideas without facing the regulatory scrutiny associated with large acquisitions. On the other hand, it can be viewed as unfair competition, detrimental to the ecosystem of smaller AI startups.

Is Suleyman the Right Fit?

Regarded as one of the sharpest minds in Silicon Valley, former DeepMind co-founder Suleyman’s act of abandoning his four-billion dollar startup did not sit well with many in the tech ecosystem. “Not a good sign for Inflection.ai that the co-founders CEO and chief scientist jump ship to Microsoft,” said Yann LeCun, chief AI scientist at Meta. Clem Delangue, CEO and cofounder at HuggingFace, opined the same. 

Suleyman has had a controversial history. He founded Google DeepMind with childhood friend Demis Hassabis and ML researcher Shane Legg in 2010. However, reports emerged that numerous current and former employees of DeepMind accused him of bullying, yelling at employees in meetings, using profanity-laden language, and making derogatory remarks.

Additionally, he allegedly assigned unrelated tasks and insisted on using private messaging platforms for work communication to evade corporate oversight. In response to the allegations, Suleyman was placed on a leave of absence. However, in a surprising turn of events, Google later appointed Suleyman as VP of AI Policy until him leaving in 2022 to form Inflection. 

Source: Pedro Domingos on X

Less than a month ago, the startup launched Inflection-2.5, a model that competes with all the world’s leading LLMs, including GPT-4 and Gemini. Inflection-2.5 approaches the performance level of GPT-4 but uses only 40% of the computing resources for training. Its chatbot Pi is based on this model.

Inflection is currently in the hands of Reid Hoffman, the co-founder and investor, as the only one remaining with the new CEO, Sean White.