The company has found the ideal โheads-I-win-tails-I-also-winโ strategy for AI dominance.
Microsoft became the world leader in AI by investing $13 billion in OpenAI, creator of ChatGPT, then using ChatGPT as the engine behind its Copilot AI assistant, which it has integrated into just about every product it creates.
But that was just the first phase of Microsoftโs AI plans. Now itโs launched the next one: hosting AI models and services from the worldโs biggest AI companies and startups, essentially its competitors. Microsoft says itโs hosting more than 1,900 AI models, from Metaโs Llama AI, to Muskโs xAI, to European startups Mistral and Black Forest Labs, to Chinaโs DeepSeek and beyond.
That way, even if Copilot doesnโt pan out the way Microsoft hopes, it will share in its competitorsโ successes. This strategy likely guarantees that Microsoft will remain the worldโs biggest AI company.
Itโs all about the data centers
Microsoftโs data centers have, from the start, been key to its AI strategy. Thanks to its deal with OpenAI, OpenAI runs its workloads on Microsoftโs Azure cloud platform. When businesses subscribe to OpenAIโs ChatGPT enterprise service, Microsoft gets a portion of the revenue, thanks to its cloud services.
To capitalize on that business model, Microsoft in 2023 launched its Azure OpenAI service, which lets Azure customers build genAI apps using OpenAIโs models. Some 60,000 customers have signed up with Microsoft for the service, according to The Motley Fool.
Microsoftโs arrangement with a wide variety of AI companies supercharges that model and reduces the companyโs reliance on OpenAI as a partner. Just before Microsoftโs annual Build developersโ conference in mid-May, Microsoft announced it would be hosting Elon Muskโs Grok AI models (called xAI) on its Azure AI Foundry service. In addition to hosting xAI and OpenAI, the service hosts Metaโs AI Llama models and many others.
That way, Microsoft piggybacks onto the success of its competitors โ if those competitors get more customers, Microsoft succeeds as well.
Thatโs only part of the companyโs AI plans. At its Build conference last week, it described in detail its vision for allowing businesses to create AI agents to perform a wide range of tasks. At the center of that vision is Microsoftโs Azure AI Foundry, which lets businesses create agents using any one of the 1,900 AI services it hosts โ or even build agents by combining several of those services.
In that way, businesses wonโt have to subscribe individually to any one AI service. Instead, they can subscribe to Microsoftโs Azure AI Foundry and pick whichever agents they want to build what they need. So if enterprises want to use AI tools from a Microsoft competitor, Microsoft still wins, because enterprises can get the tools straight from Microsoft. And Microsoft also wins because its Azure AI Foundry has become the place for customers to go when they want to build agents using multiple AI services at the same time.
Microsoft also announced at Build that itโs adding agents that can write code on the companyโs GitHub service, used by many businesses and software companies to manage their code bases. Already, OpenAI and Google-backed startup Anthropic have their agents on GitHub. So in yet one more way, Microsoft is piggybacking onto the success of its competitors.
Whereโs Amazon in all this?
All this happening even though Amazon, not Microsoft, is the worldโs biggest cloud provider. (Microsoft is slowly closing the gap with the cloud leader, though.) You would expect that Amazon would use its long-dominant market position to sew up hosting AI services in the way Microsoft has been doing.
Amazon has tried but has not had nearly the same success as Microsoft. Amazon Bedrock competes directly against Microsoftโs Azure AI Foundry but hosts far fewer AI models.
In this head-to-head battle, thereโs no doubt Microsoft will win. An analysis by a provider of AI-powered banking solutions concludes that Microsoftโs offering is far better for enterprises, better for those who want access to AI chatbots, and better for data analytics. The analysis also concludes that Microsoftโs services are more cost-effective. Bedrock, the report concludes, is better only for startups and development-focused companies.
Microsoft has been capitalizing on its enormous enterprise footprint โ itโs using its entire product line, from Microsoft 365 to Azure, to sell existing enterprise customers on using Azure AI Foundry services. Amazon has no way to compete against that.
The upshot
The bottom line is that Microsoft will remain the worldโs most valuable AI company and will probably even extend its lead. No other company offers nearly as extensive a range of AI tools, and with Microsoftโs one AI hosting service to rule them all, that shows no sign of changing.
The company has found the ideal โheads-I-win-tails-I-also-winโ strategy. From here on in, the only battle will be for second place.
