Tech Explained: Here’s a simplified explanation of the latest technology update around Tech Explained: Microsoft building its own high-powered AI models, as it looks to slash dependence on OpenAI in Simple Termsand what it means for users..
Microsoft (MSFT) says it’s on a path to developing high-powered frontier models, an acknowledgment that it is looking to wean itself off its dependence on partner models from OpenAI (OPAI.PVT).
Microsoft AI CEO Mustafa Suleyman told Bloomberg in an interview published Thursday that the plan is to have “state-of-the-art” models for multiple types of data, known as multi-modal models, including for text, audio, and images.
The news comes less than a month after Microsoft moved Suleyman’s focus in its AI subsidiary to developing its own models, turning development of the company’s Copilot platform over to Jacob Andreou.
Microsoft jumped out to an early lead in the AI race thanks to its partnership with OpenAI, which provides Microsoft with the company’s intellectual property through 2032.
As of October, Microsoft held a 27% stake in OpenAI Group PBC. The company also recently contributed to OpenAI’s latest fundraising round, which brought in $122 billion at a valuation of $852 billion.
But the romance between Microsoft and OpenAI has soured over the past few years. Microsoft no longer has first right of refusal to serve as OpenAI’s main cloud provider, allowing the ChatGPT developer to ink deals with rivals including Oracle and Amazon.
Part of the issue was Microsoft’s inability to meet OpenAI’s enormous computing demands, leaving the startup capacity constrained, which also limited Microsoft’s ability to develop its own AI models.
Microsoft has also branched out on its own, signing on with OpenAI rival Anthropic (ANTH.PVT).
OpenAI and Anthropic, however, are also developing productivity capabilities that could prove problematic for Microsoft in the long run.
It doesn’t help that Wall Street is also questioning whether AI will steal market share away from software companies via their own offerings.
Microsoft stock has taken a beating on those concerns over the last few months, declining a stunning 23% since the start of 2026.
And despite posting better-than-anticipated earnings results in late January, Microsoft’s stock price has dropped 21%, as investors question the company’s spending plans and whether it will reap the same rewards from its AI investments that cloud computing peer Google (GOOG, GOOGL) can.
Unfortunately for Microsoft, the company’s ongoing capacity problems mean that it has no choice but to spend more to ensure it has the computing power to train and run both its customers’ AI offerings and its own.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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