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Microsoft Shells Out $650 Million to Inflection AI for Talent Poach Amid Own Workforce Reductions

Last Updated March 22, 2024 12:03 PM
James Morales
Last Updated March 22, 2024 12:03 PM

Key Takeaways

  • Microsoft has invested $650 million in Inflection AI.
  • As part of the deal, Microsoft will shift Inflection’s employees to a new consumer AI department.
  • While the Big Tech firm is bulking out its AI workforce, other departments have been subject to mass layoffs.

Microsoft’s AI strategy is to spend big and secure as many models as possible to offer on its Azure cloud platform.

For its latest investment, the firm has splurged $650 million on a deal that will give it access to Inflection’s AI models and its employees. Highlighting the central role AI now plays for the company, the move comes just weeks after Microsoft laid off nearly 2,000 workers in other departments. 

Microsoft AI: The Exception to Broad Job Cuts

Since the beginning of 2023, Microsoft has reduced its global headcount by more than 12,000, representing more than 5% of its workforce.

In the latest round of job cuts, 1,900 employees from across the firm’s gaming operations were made redundant earlier this year. Those affected include staff from Activision Blizzard, Xbox and ZeniMax, which are all owned by Microsoft.

Meanwhile, Microsoft is on an AI hiring spree, with roles in the field representing more than a quarter of all jobs listed on its career website .

As part of the latest deal, most of the 70-strong Inflection team will be shifted to a newly created consumer AI unit called Microsoft AI. 

Essentially a corporate takeover in all but name, the $650 million arrangement will see Inflection’s investors reimbursed 1.5 times what they paid for their stake. In exchange, Microsoft not only gets to transplant Inflection’s staff into its own AI department. It also secures a licensing deal covering its popular foundation models.

Buying Out the Competition

With Inflection now under Microsoft’s control, the Silicon Valley giant will add its Large Language Model (LLM), Pi, to Azure’s increasingly packed offering.

The latest investment comes after Microsoft signed a 15 million euro deal with Mistral AI last month. In that agreement, Microsoft secured exclusive distribution rights to Mistral’s LLM, representing a stark pivot from the French startup’s open-source roots.

Microsoft AI Business Sparks Monopoly Concerns

The Mistral deal set alarm bells ringing in the EU, where Microsoft’s AI business was already the subject of an antitrust probe.

If the Big Tech firm’s AI game plan started in earnest with its close partnership with OpenAI, almost every move it has made in the space since can be characterized as an attempt to buy out foundation models that threaten to take market share from GPT-4.

With a handful of exceptions – Claude, Google’s Gemini and a few open-source models – the house of Azure is rapidly absorbing every and any LLM that might potentially undermine Microsoft’s AI dominance.

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