Hey Everyone,
It’s not usually in my job description to be aware of what Microsoft, the world’s first, second most valuable corporation is up to in AI. Yet Microsoft is doing a lot of important things recently as a business and I want to dial in on some of those. All of this impacts the future of AI, so read on.
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AI will add $19.9 trillion to global economy by 2030, IDC predicts.
~ Read more about this quote.
Also given the importance of Azure AI to the ecosystem and the absurd amount of Cloud credits they have likely given to OpenAI in their $13 Billion investment (more soon to be sure!), how is their Copilot Era doing? Microsoft’s role in the Generative AI movement has been pivotal. But how good are they themselves in the execution of their products around AI?
Copilot is Microsoft’s take on productivity-boosting generative AI and it’s really not clear how well they are executing or if it’s actually having the desired effect. I have a lot of respect for Microsoft Research and in particular what Microsoft Research Asia has done historically for China’s AI scene. Microsoft has been able to use its investment in AI to grow its Cloud business faster in pursuit of AWS on top of whatever revenue will result in their own GPT-4 based products (that was itself a first mover).
Microsoft are the best technology company at using paid subscription SaaS revenue way before subscriptions became so popular and literally everywhere! They are such a diversified company and their many product updates in AI proves it.
In a shocking move, Microsoft and BlackRock have formed a group to raise $100 billion to invest in AI data centers and power. The Global Artificial Intelligence Infrastructure Investment Partnership is initially looking to raise $30 billion for new and existing data centers.
As a stock, Microsoft importantly raised its quarterly dividend 10% and unveiled a new $60 billion stock-buyback program, matching the size of a repurchase plan three years ago. Microsoft’s stock is up 31% in the past year. Microsoft also hired Carolina Dybeck Happe as their new COO, a role they haven’t had for many years that they need in the complicated AI era. Microsoft has a market cap of $3.234 Trillion and it’s hard to put into words what a significant customer they are for Nvidia’s AI chips.
So about two day ago they had their event – Watch it here.
Microsoft 365 Copilot: Wave 2 | Microsoft September 2024 Event
Microsoft announced a dozen Copilot-branded products powering various capabilities in Microsoft software and services, like summarizations in Microsoft Outlook and transcriptions in Microsoft Teams.
Microsoft introduced Pages, Python in Excel, and agents. Read more.
“This is an entirely new work pattern – multiplayer, human to AI to human collaboration,” Microsoft
Microsoft Copilot now have pages. Copilot also drives Copilot Pages, an “embeddable digital canvas” where users can edit and share Copilot-originated content. Microsoft are also a gaming company, perhaps they want us to work with AI in a multi-player setting.
Some of their ideas around AI, work and productivity are actually innovative. I feel the same way about Zoom for that matter (like sending a clone of ourselves to a meeting).
While many of Microsoft’s customers actually prefer ChatGPT, it’s not by accident OpenAI are making many AI products, just like Microsoft. They are using a similar playbook that is clearly orchestrated around Microsoft’s own philosophy of diversification and SaaS dominance.
Microsoft’s execution in AI revolves around “Copilot Innovation” with so many different AI products, most of which are related to current products. Google has a similar strategy but some of their tools like NotebooksLM feel entirely useful. I might only be a monthly active user of Microsoft Copilot.
Here is the short version of the Event: in just 2:47: Web + Work + Pages
Microsoft is trying to make itself an essential interface to access AI. Microsoft is also building many new datacenters in SE Asia and also expanding into the Middle East.
Copilot Pro is $20 a month and has a number of features and unique aspects. Copilot Pro gives users access to generative AI functions across the Microsoft 365 suite of productivity apps: Word, Excel, PowerPoint, Outlook, and OneNote. They also get access to BizChat. Business Chat (BizChat) is the at the center of Microsoft 365 Copilot.
Copilot helps you use Microsoft software products and do more in less time. So essentially as you might suspect in Word and OneNote, Copilot can write, edit, summarize, and generate text. Copilot in Excel and PowerPoint can turn natural language prompts into presentations and visualizations (optionally grounded in data from files and templates). And in Outlook, Copilot can help draft email responses with toggles for adjusting the length or tone.
The Rise of GAIIP
The $30B AI Data Center Investment Fund (that will scale to $100 B) includes BlackRock, Global Infrastructure Partners, Microsoft, and MGX on founding. If you realize how important datacenter expansion is and the AI chip market has been, this is just huge news. This has the potential to transform the energy sector and the entire semiconductor supply chain globally, as well as power the next generation of AI.
The companies are part of the Global Artificial Intelligence Infrastructure Investment Partnership, or GAIIP, which was announced in a press release on September 17th, 2024.
The funds will be used to “make investments in new and expanded data centers to meet growing demand for computing power, as well as energy infrastructure to create new sources of power for these facilities.”
Microsoft also has Github Copilot, one of the most important AI coding tools that make software programmers more productive. Microsfot’s Q4 revenue increased 15% YOY. Microsoft also disclosed spending $19 billion on capital expenditures in the June quarter. As BigTech capex continues to rise, AI and datacenters, GPUs and the semiconductor industry are huge benefecaries as we have seen in the era of Nvidia.
BigTech’s Outrageous Bet on AI Continues into late 2024
Microsoft is one of the big customers of Nvidia’s latest products. Bloomberg data estimates that Microsoft makes up 15% of Nvidia’s revenue. So companies like Microsoft and OpenAI are behind a lot of Nvidia’s success. Microsoft’s own attempt at merging GPT-4 into its products and its Copilot Era in the big picture are likely an afterthought, but at least they are trying.
Jared Spataro, Microsoft’s corporate vice president of AI at Work, declared that “Copilot is the new UI for AI.” I thought it was ChatGPT, but what do I know? Microsoft’s investment in GAAIP comes on top of the capital expenditures needed to support infrastructure expansion for its Azure public cloud, which supplies OpenAI and other AI customers. So there are a lot of moving pieces here.
One thing is clear, Microsoft is going “all-in” on AI. For its full fiscal year ended June 30, Microsoft spent $55.7 billion on capex, up 75% from the prior year. And Microsoft expects to spend even more on capex in fiscal 2025 than it did in the just-finished fiscal 2024.
AI is the End Game but to What? More Profits.
In business terms, Nvidia’s superman isn’t Jensen Huang, it’s Microsoft or Satya Nadella, that’s how strong of a customer Microsoft is to Nvidia. The idea that BigTech is colluding for shared advantages is getting a long stronger in the era of Generative AI. If BlackRock, the world’s largest money manager, has highlighted the energy sector as one of its top opportunities for growth, how they are working now directly with Microsoft and MGX, the Abu Dhabi-backed investment company, who are both general partners in the fund, is a whole new level of collusion of the financial elite.
Rationally Nvidia’s rise is not some organic thing in that Amazon, Meta, Microsoft, and Alphabet are believed to be among Nvidia’s biggest customers, making up roughly 40% of its revenue. So BigTech’s capex in AI is “manufacturing” the Generative AI movement, from a business perspective. It’s literally funding everything. Anything you hear pro and con about AI pales in reality compared to this partnership among the world’s top firms. They are saying what they have always said: AI is the end-game.
Microsoft can announce Pages or Copilot agents, but we know they don’t have to be a leader in these things to be impactful. Azure has reached incredible heights and growing faster than AWS. I believe by 2030, they will surpass AWS. But Microsoft’s business segment: “Intelligent Cloud”, generated $28.52 billion in revenue. It includes the Azure public cloud, Windows Server, Nuance and GitHub. It’s also growing at nearly 20%.
I have been tracking Microsoft’s expansion of datacenters into several South Eastern Asian countries. Then we have potential “multi-Datacenter training” and you begin to realize how tangible the AI supercomputer datacenter race is going to be and who can afford to be in the race. It’s not the copilot era, it’s the datacenter compute era the winners in the 2030s will unlock tens of Billions of dollars their rivals won’t have access to.
Copilot Wave 2
The new features and capabilities coming in Copilot Wave 2 are:
Copilot Pages, a bridge between the browser version of Copilot search and an online canvas.
Copilot in Excel, including XLOOKUP and PivotTables.
Copilot in Excel with Python coding.
Narrative builder in PowerPoint, which creates first drafts of presentations from prompts.
Brand manager in PowerPoint, allowing Copilot work within brand templates.
Copilot in Teams, with access to meeting chats in addition to audio.
“Prioritize my inbox” with Copilot in Outlook.
Enhancements to Copilot in Word, enabling the AI to pull information from external files and place a floating prompt box in the Word document.
Copilot in OneDrive to field queries about documents and compare files.
Copilot agents — created in either Microsoft Business Chat or SharePoint — which can be connected to various business processes and automatically perform tasks.
Copilot Pages
Microsoft Copilot Pages is a new feature introduced by Microsoft designed to facilitate multiplayer AI collaboration within the Microsoft 365 ecosystem.
It acts as a dynamic, persistent canvas where users can interact with the Copilot chatbot and collaboratively edit content in real-time.
This feature allows teams to pull insightful responses from Copilot into a dedicated page, enabling them to refine, expand, and share their work seamlessly.
It sounds to me like a Google docs for Copilot generated content. Yikes I don’t know about that. According to the company, Pages takes ephemeral AI-generated content and makes it durable, so you can edit it, add to it, and share it with others.
I’m not even sure ChatGPT is durable per se, so we will have to see about this.
Copilot in Excel with Python
Copilot in Excel with Python certainly sounds useful if you spend any amount of time in Excel.
Copilot in Outlook, Word, Teams and Drive
The ability to intelligently summarize your inbox is being brought to Outlook with a new feature called ‘Prioritize my inbox’. I’ll admit I’m a bit skeptical about AI “summarizing” our Emails though it is sometimes useful.
As you can see Microsoft is doing a lot, but I’m not sure it amounts to much unless you literally live in the Microsoft 365 environment. The reality is Microsoft is investing in France and multiple countries all around the world also to develop the AI workforce of tomorrow. Microsoft is a huge investor in Cloud and AI infrastructure but also the AI workforce and training.
Microsoft’s capex investment in AI is Driving its Cloud Growth Faster
Azure is driving Microsoft’s growth and AI is driving Azure’s growth: this is the most important pivot of Microsoft and something to watch as the Generative AI trend continues to play out in the 2020s:
Amazon isn’t investing as much as Microsoft or Google in AI and AWS’s growth trajectory will show it. Amazon is growing better in Ads. Amazon’s advertising business grew 20% in the second quarter. Soon it won’t just be an Ads duopoly of Google and Meta.
In this light, Microsoft has to invest in AI, because its entire revenue growth revolves around it, it’s not a choice. Azure AI is the key of this entire company. If OpenAI grows up to be a significant competitor of Bing, of Copilot and other services, it is going to be a major problem. The short-term pros of working with OpenAI were high in the early 2020s, but that situation might turn out spectacularly wrong or poorly in the later 2020s. If I was Satya Nadella I’d be turning my sleep in 2024. Edward Zitron’s thesis on AI is flawed, but some of his insights on OpenAI are still hilariously correct.
Microsoft back in the Cortana days also had what seemed like a first-mover advantage, and we know how that turned out. Nobody remembers Cortana, but they do know what Siri or Alexa are. So it’s Microsoft’s bigger moves globally that are ultimately more important and in continuing to fund OpenAI, that becomes the most expensive AI research lab of all-time.
Copilot in Teams can now synthesize both the contents of an actual meeting and what was sent in the chat to create a summary of the entire meeting. Generative AI has uplifted some software, but some of it works awkwardly even years later.
Agent Builder
BigTech has been racing to build data centers full of Nvidia graphics processing units, or GPUs and what they do with it internally and or product-market fit improvements to their own ecosystems doesn’t even matter that much, since for these companies Generative AI boosts their Cloud and Ads profitability and allows their core businesses to grow faster. Any other product growth is a bonus. A lot of people don’t realize this.
Microsoft is doing partnerships with Military tech companies, and claiming one thing while doing another in their ESG and future of energy initiatives. Brad Smith, the company’s vice chair and president, and Melanie Nakagawa, its chief sustainability officer, described a “planetary crisis” that AI could help solve, according to the Atlantic, but as usual, there’s two sides to this. Just like Microsoft Copilot products are mostly forced on users by their companies since there are few alternatives to Microsoft windows software and Microsoft 365. Microsoft are a victim of their own success.
Microsoft in Copilot Wave 2 claims it’s made 700 product updates and shipped over 150 new features in 2024, but little of it even matters. Bill Gates can boast about starting Microsoft over again as an AI-centric company, but the company he founded has helped found has enabled OpenAI, a company that will be a direct competitor and already likely is a major competitor of its AI products. The advantage having early access to OpenAI’s GPT-4 and research hasn’t been a deal breaker. Why would you need Microsoft Copilot, when there’s already ChatGPT, Claude and Gemini?
Gates researched the AI industry for his upcoming Netflix docuseries “What’s Next? But do people like Bill Gates or Eric Schmidt actually know what’s next, they talk about what they have invested in, from killer drones to pandemics and the Grandfathers of Silicon Valley clearly haven’t left the world a better place than how they encountered it, that optimism of the 1990s about the internet has turned fairly dystopian.
Copilot like Cortana before it, will likely turn into a business joke. By funding OpenAI Microsoft likely made the world a more dangerous place. OpenAI due to their influence, are now behaving like them. Microsoft investing in G42 is to bolster its influence in the Middle East is about getting more funding for other projects, it’s certainly not about Responsible AI or being a green leader in AI. There might be a touch of hypocrisy here. As BigTech invests more than anyone else in the world can afford in AI and datacenters, what will this do to their reputation and regional issues we have seen in the EU towards their practices?
Are BigTech now Gatekeepers of American Exceptionalism?
Microsoft is training its AI on your LinkedIn data without your consent. You know, because Meta is doing it. And the FTC and SEC don’t do much because the U.S. government now depends on the likes of Azure, AWS and Google’s technology in their core administration. Rule of law in data protection and AI regulation is close to non-existent in the U.S. BigTech is doing a lot of things in a spirit of American exceptionalism and even protectionism. Unfortunately this could lead to poor outcomes for the rest of the world, both economically and otherwise.
This is mostly about maintaining dominance, not about being customer-centric or building great products. Using AI hype to stimulate even more cloud growth is a multi-billion dollar program. Meta’s earnings proves it also can stimulate even more advertising growth and ARPU. BigTech’s appetite for capex spending in datacenters and AI is just beginning. Silicon Valley monopolies are only going to get stronger and more globally entrenched.
Microsoft was one of the first to say that Generative AI was going to make workers more productive. The idea that frontier models will make some junior developers and software engineers less valuable appears to be actually occuring at some firms. What white-collar jobs will follow? What will this do to society at scale and in the span of a few decades?
Microsoft and G42 have announced that they will establish two AI centres in Abu Dhabi, building on the partnership and the $1.5 billion Microsoft investment announced in April this year. When BigTech is playing geopolitics to unlock oil money for their own energy and datacenter projects like I alluded to with GAIIP, this means Americans are willing to do anything to continue their technological superiority in a grand collusion of the global elite. It positions China as a more hostile strategic competitor and means every continent becomes a battle zone of economic exceptionalism.
Big firms have becomes weapons of Nationalism. Microsoft is already tied at the hip with the Pentagon in terms of cybersecurity. You cannot really argue that BigTech is truly independent from the U.S. Government or whitehouse any longer. Even the antitrust hearings by the DOJ, FTC and States feel mostly like a show to appease the public. Recently Google won a legal bid to overturn 1.5 billion euro antitrust fine in EU digital ad case. The amount of lobbying and the ability to spend on lawyers of these firms is nearly unlimited.
The Great Datacenter Big Bang
With capex in AI going to increase in 2025, this means building even more datacenters and bigger AI supercomputers of compute. Microsoft is well positioned to become even more profitable since they are the major catalyst and first-mover of this movement.
At a certain point even Amazon, xAI, China and maybe even OpenAI themselves, aren’t able to follow the likes of Microsoft, Google and Meta. These companies believe what what AI is today pales in comparison to what it will become in the 2030s and that their economic survival is at stake. It’s not just about maximizing shareholder value, it’s about becoming the biggest winners of an AGI empowered future.
While the CCP humbled its own BigTech firms that now seem like a shadow of their pre 2021 selves, the U.S. have enabled monopolies to form that outcompete and impoverish even Europe, even as they build datacenters in Europe. They are positioning their datacenter claims on parts of Asia in a form of quasi AI colonialism. The Big Bange of AI supercomputers and datacenters will allow American BigTech companies to position the U.S. nearly like an AI hegemony. That will be the asterisks in history Microsoft might one day be known for.
BigTech will become Energy Companies Next
Microsoft will invest so much in new forms of energy to power its datacenters and AI compute, it’s on course to become an Energy company as well. Oil money will enable this to happen. The richest companies in the world will have even more leverage once they posses the holy-grail of AI, whatever commercial form of AGI you want to all it. That’s the push for AI Supremacy we are seeing today, which makes Copilot Wave 2 news almost irrelevant in comparison.
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