Microsoft strikes $650 million deal with Inflection AI to license its AI technology and talent

In a move signaling Microsoft’s deepening commitment to AI, the tech titan has inked a deal with the promising AI startup Inflection, according to a report from Reuters. Sources close to the matter revealed that Microsoft will shell out nearly $650 million in cash to acquire Inflection, securing not only its cutting-edge models but also the talent behind them.

The news comes just two days after reports that Microsoft hired DeepMind and Inflection co-founder Mustafa Suleyman to run its newly formed consumer AI unit called Microsoft AI.

As part of the deal, Microsoft will gain access to Inflection’s prized AI models, which will be integrated into its Azure cloud service, bolstering its AI offerings for consumers. But the deal is not just about acquiring technology; it’s also a talent grab. In addition to Suleyman, Microsoft also snagged Inflection co-founder Karen Simonyan, along with the majority of the startup’s 70-person team.

Suleyman, now CEO of the unit, and Simonyan, assuming the role of chief scientist, bring their wealth of expertise and innovation to Microsoft’s AI endeavors. The infusion of talent extends beyond the co-founders, with key executives such as Inflection’s vice president of engineering also joining Microsoft’s ranks, as per LinkedIn profiles.

While Microsoft remained tight-lipped about the deal, sources indicate that the move marks a strategic shift for Inflection, as it pivots towards catering to enterprise clientele, leveraging its advanced models to cater to diverse industry needs, Reuters reported.

This acquisition comes on the heels of Inflection’s meteoric rise in the AI sphere, buoyed by substantial investments from tech heavyweights Microsoft and Nvidia. With a valuation soaring to $4 billion, Inflection garnered attention for its groundbreaking foundation models and its widely used chatbot Pi, boasting over 1 million daily active users.

However, the deal hasn’t escaped the watchful eye of regulators. Microsoft, already under scrutiny from the U.S. Federal Trade Commission regarding its AI investments, may face further scrutiny as it absorbs Inflection. Experts speculate that the acquisition could invite closer regulatory examination, particularly regarding competition in the foundation model market.

“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,” commented Steven Weber, professor at the UC Berkeley School of Information, who has received research funding from major tech firms.

For Microsoft, the acquisition not only bolsters its AI capabilities but also solidifies its position as a leader in the rapidly evolving AI landscape. As the tech giant continues to innovate and expand its AI offerings, the industry eagerly awaits the implications of this landmark deal.

A year ago, we covered Microsoft AI after the tech giant fired its entire AI ethics and society team as part of recent layoffs that affected 10,000 employees across the company.

Inflection AI was cofounded in 2022 by LinkedIn co-founder Reid Hoffman, DeepMind co-founder Mustafa Suleyman, and former DeepMind researcher Karén Simonyan. Inflection AI is one of the highest-profile startups working on generative AI technology similar to OpenAI.