Microsoft has agreed to pay approximately $650 million in cash to the emerging artificial intelligence company “Inflection AI” in an unconventional deal, allowing Microsoft to utilize Inflection AI’s models and leverage most of the startup’s employees, including its co-founders, according to a knowledgeable source as reported by Reuters.
The models of famous startups will be available on Microsoft’s Azure cloud service, the source stated.
Inflection AI uses licensing fees to pay investors like Greylock, Dragoneer, and others, according to the source.
The source added that investors will receive a return of 1.5 times their investment.
Microsoft has hired the co-founders of Inflection AI, Mustafa Sleiman and Karen Simonian, and most of the 70-member team at the startup to join the new Consumer AI unit named Microsoft AI.
The software leader sought to unify and expand its range of consumer-oriented artificial intelligence products.
Sleiman will assume the position of CEO of the unit, while Simonian will join as the Chief Scientist. Other employees, including the Vice President of Engineering at Inflection AI, will join Microsoft according to LinkedIn profiles.
Inflection AI emerged as a leading player in the generative artificial intelligence field after securing $4 billion in funding from Microsoft and Nvidia in cash and cloud credits in June.
The company has developed its core models and manages the Pi chatbot, which reportedly has over a million daily active users earlier this month.
With a new CEO now appointed, Inflection AI announced on Tuesday that it will shift its focus towards marketing models to corporate clients.
Experts indicated that the deal may require further regulatory scrutiny for Microsoft, which is already under investigation by the US Federal Trade Commission for its investments in artificial intelligence.
Stephen Weber, a professor at Berkeley School of Information, stated that this deal could be an attempt to reduce competition in the foundational models markets, where Inflection is expected to remain a shadow of its former self. Weber has received research funding from technology companies like Google and Microsoft.
