Welcome to the AI Era (Premium)

It’s happening: Microsoft CEO Satya Nadella has effectively announced a new era of computing based on AI, and it will transform both his company and the industry.

Microsoft’s AI pivot, at least what we’ve seen publicly, seemingly happened as dramatically and quickly as the sudden advent of Open AI-based technologies like ChatGPT, DALL-E, and VALL-E, thrusting us into the AI era. And as I speculated recently in Maybe AI is the Next Wave (Premium), the software giant’s decisive embrace of this technology could help it emerge as a leader of the most important technology wave since the advent of personal computing.

Asked during a panel at the World Economic Forum’s annual event in Davos, Switzerland how customers might see these technologies appear across the Microsoft stack in the short term, Nadella cited the initial ways in which his firm will commercialize this technology: first through the Azure Open AI service that was announced today, then by making a ChatGPT API for developers, and then by adding these capabilities to “every Microsoft product.” In other words, Microsoft will become the AI company.

But this didn’t happen overnight, even though it feels like that. Instead, it started with years of work. (And, it should be noted, billions in investments.)

“At Microsoft, the one thing that is probably worth stating is that this thing, ChatGPT and the GPT family of models, didn’t just happen,” he said. “We’ve been partnering with Open AI deeply for multiple years. And we built, in Azure, our public cloud infrastructure, an AI supercomputer. Which, by the way, as a systems architecture has been a massive breakthrough because the way these workloads, or the way you train large models, is very different than anything out there. It’s a much more large-scale, synchronous, distributed job. So we have to build the system—from storage to compute to network—that really allowed us to even build this capability.”

“So at this point, the way Microsoft’s really going to commercialize all this is that Azure is going to become the place for anybody and everybody who thinks about AI and large-scale training,” he continued. “And we are way ahead on that, and we continue to plan to really step it up there.”

“Second, we want to make these foundational models available as platforms,” he said, highlighting Microsoft’s core competency. “So that means that anybody who wants to build on them, in any domain, can build on top of that. Soon. Today, in fact, we just made the Azure Open AI service available generally. And then even ChatGPT will be available as an API, and so we’re very, very excited about that. And we will even incorporate this in our own applications. So you can fully expect that every product of Microsoft will have some of the same AI capabilities completely transform the product.”

This is an exciting vision of the future. But the advent of Open AI, ChatGPT, and its other AI-based models isn’t the endgame. It’s just the beginning, Nadella said.

“The best way to prepare for [the AI era] is not to bet against this technology, and this technology helping you in your job and your business process,” Nadella said at Davos, explaining his commitment and addressing some emerging criticisms of AI-generated content. “I’m not claiming by the way that this is the last innovation in AI. This is not linear progress.” And when he was asked by an audience member specifically how these new AI tools would impact The Wall Street Journal [and thus other writers of news], he responded: “I think they’ll be able to write great articles in the future relying on GPT.”

Nadella also confirmed specifically that Microsoft’s embrace of AI would extend across the personal productivity offerings the firm provides in Office, noting that “we need something that truly changes the productivity curve so we can have real economic growth.”

To be clear, Microsoft’s embrace of AI is meaningful specifically because it impacts the entire stack. When the software giant first embraced cloud computing over 20 years ago, it was positioned as a logical evolution of its previous on-premises server products. But when this shift excited shareholders and sent Microsoft’s stock price into the stratosphere, the firm seemed to lose its way a bit with once-important legacy products, like Windows, that couldn’t fit into the cloud mold. These products became inconvenient truths in an era when Wall Street only wanted to hear about the cloud.

But AI is different: AI will be infused across the Microsoft stack, delivering incredible benefits to corporate customers, developers, and the individuals who still toil away every day in Windows and Office. And this means that Microsoft no longer must ignore these products when it discusses its financial results: it can instead promote the advances it’s making and how these advances will improve its customers’ lives. The push to AI won’t shift the emphasis away from personal computing, it will include personal computing. And Wall Street will eat it up.

Put simply, this is a win-win for just about everyone and everything in this equation. Except, of course, Microsoft competitors, and we can expect firms like Amazon, Google, and Meta to ramp up their own messaging on AI in response. This could be a new golden age of competition, to be sure. But for now, at least, Microsoft is once again in the driver’s seat.