Microsoft has signed an unconventional deal with AI startup Inflection for approximately $650 million in cash, Reuters news report said.
This deal grants Microsoft access to Inflection’s AI models and facilitates the recruitment of most of the startup’s staff, including its co-founders.
Inflection’s AI models will be integrated into Microsoft’s Azure cloud service. The licensing fee paid by Microsoft will be utilized by Inflection to compensate investors, including Greylock and Dragoneer.
Microsoft has recruited Inflection’s co-founders, Mustafa Suleyman and Karen Simonyan, along with the majority of the startup’s 70-person team, to spearhead a newly established consumer AI unit named Microsoft AI. This move aligns with Microsoft’s broader objective of enhancing and consolidating its AI offerings for consumer products.
Suleyman assumes the role of CEO within the new unit, while Simonyan joins as chief scientist. Notably, several other key employees, including Inflection’s vice president of engineering, have transitioned to Microsoft, as evidenced by their updated LinkedIn profiles.
Inflection AI has gained prominence in the field of generative AI, having secured significant investments totaling $1.3 billion from industry giants Microsoft and Nvidia. The tech startup, valued at $4 billion in June, has developed its foundation models and operates a popular chatbot named Pi, boasting over 1 million daily active users.
Inflection on Tuesday announced its strategic pivot towards catering to enterprise customers, signaling a shift in its business focus.
However, experts anticipate that the deal could attract regulatory scrutiny, particularly considering Microsoft’s existing inquiries from the U.S. Federal Trade Commission regarding its AI investments.
Steven Weber, a professor at the UC Berkeley School of Information, noted, “This deal could be seen as an effort to reduce competition in the foundation model markets, as Inflection is going to be a shell of its former self.”
The acquisition of Inflection marks a significant milestone for Microsoft’s AI endeavors, positioning the tech giant to strengthen its foothold in the rapidly evolving AI landscape while potentially reshaping competition dynamics in the industry.
