Microsoft is developing its own AI models to compete with OpenAI: Report

In a strategic shift that signals a move away from its exclusive reliance on OpenAI, Microsoft is actively developing its own artificial intelligence (AI) reasoning models, internally referred to as ‘MAI.’ The initiative, first reported by The Information, is aimed at enhancing Microsoft’s AI capabilities while reducing its dependence on the ChatGPT maker.

Microsoft has already begun testing AI models from xAI, Meta, and DeepSeek as potential replacements for OpenAI’s technology within its flagship AI product, Microsoft 365 Copilot. This diversification comes despite Microsoft’s significant investment of $13.75 billion in OpenAI since 2019, underscoring its broader ambitions in the AI space.

The Development of MAI Models

The MAI models are designed to handle complex reasoning and problem-solving tasks, with performance levels that reportedly rival those of OpenAI and Anthropic. Mustafa Suleyman, who leads Microsoft’s AI division, has overseen the completion of a family of these models. According to The Information, Microsoft is leveraging chain-of-thought techniques, an advanced AI reasoning process that generates answers with intermediate reasoning steps, to train these models.

Notably, Microsoft is already experimenting with integrating these models into Copilot, replacing OpenAI’s technology in some instances. The company is also considering offering MAI as an application programming interface (API) later this year, allowing external developers to incorporate Microsoft’s AI capabilities into their own applications.

Reducing Dependency on OpenAI

Microsoft’s move to develop in-house AI aligns with its broader strategy to diversify its AI infrastructure. Initially, Microsoft 365 Copilot was heavily marketed as using OpenAI’s GPT-4 model when it launched in 2023. However, over time, Microsoft has explored alternative AI models for three primary reasons: to avoid exclusive dependency, reduce costs, and enhance processing speeds.

This shift follows earlier reports from Reuters in December 2024, which revealed that Microsoft was integrating both internal and third-party AI models into Copilot. While Microsoft remains a key partner of OpenAI, the nature of their collaboration has evolved. A notable change came when Microsoft relinquished its exclusive role as OpenAI’s cloud provider, opting instead for a ‘right of first refusal’ agreement, which allows OpenAI to seek cloud services from other providers, such as Oracle

As Microsoft continues to develop its AI capabilities, the introduction of MAI could significantly impact the broader AI ecosystem. If Microsoft successfully deploys its models across its suite of products and offers them to developers, it could reshape competition in the AI space, challenging OpenAI’s dominance while giving businesses more flexibility in integrating AI-powered solutions.

Neither Microsoft nor OpenAI has responded to media requests for comments on these developments, as reported by Reuters.