Microsoft’s Big AI Hire Can't Match OpenAI
Mustafa Suleyman hasn’t delivered the turnaround he was hired to bring
From Tom Dotan, our new senior correspondent, fresh off two years covering Microsoft for the Wall Street Journal
At Microsoft’s annual executive huddle last month, the company’s chief financial officer, Amy Hood, put up a slide that charted the number of users for its Copilot consumer AI tool over the past year. It was essentially a flat line, showing around 20 million weekly users.
On the same slide was another line showing ChatGPT’s growth over the same period, arching ever upward toward 400 million weekly users. OpenAI’s iconic chatbot was soaring, while Microsoft’s best hope for a mass-adoption AI tool was idling.
It was a sobering chart for Microsoft’s consumer AI team and the man who’s been leading it for the past year, Mustafa Suleyman.
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The Licensing Acquihire of Inflection & Its CEO
Microsoft brought Suleyman aboard in March of 2024, along with much of the talent at his struggling AI startup Inflection, in return for a $650 million licensing fee that made Inflection’s investors whole, and then some.
It was an eyebrow-raising, trend-setting deal, which like a handful of others at the time looked to be a good way for the tech giant to avoid antitrust trouble in its quest for AI leadership. Suleyman was one of a select few truly big names in generative AI, someone who could be a beacon for talent and a catalyst for fresh thinking at a proverbial lumbering giant.
Yet from the very start, people inside the company told me they were skeptical. Many outsiders have struggled to make an impact or even survive at Microsoft, a company that’s full of lifers who cut their tech teeth in a different era. My skeptical sources noted Suleyman’s previous run at a big company hadn’t gone well, with Google stripping him of some management responsibilities following complaints of how he treated staff, the Wall Street Journal reported at the time.
There was also much eye-rolling at the fact that Suleyman was given the title of CEO of Microsoft AI. That designation is typically reserved for the top executive at companies it acquires and lets operate semi-autonomously, such as LinkedIn or Github.
And yet, the deal made sense. Satya Nadella was unhappy with the performance of the revamped Bing and its OpenAI-powered chatbot. The extraordinary late 2023 machinations at OpenAI, where CEO Sam Altman was fired by the non-profit board only to be reinstated less than a week later, convinced Nadella and the Microsoft board that they needed to wean off total reliance on the drama-addled company and its models. Microsoft also was hard up for talent: after years of siphoning resources away from its research arm to OpenAI, the Redmond tech giant needed to reignite its internal efforts.
By hiring Suleyman, Microsoft was taking a flier on a well-known but controversial executive with a product sensibility.
And as Hood’s slide made clear, that bet hasn’t yet paid off.
Microsoft in transition
Microsoft is in the midst of a tectonic shift, one that I spent the last couple of years writing about for the Wall Street Journal. Like Disney entering the streaming era, or Uber finding its way after the ouster of its founder — two other cases of dramatic corporate transition that I’ve had the privilege of covering — Microsoft urgently needs to redefine itself as the tech industry resets around AI. It’s a good moment to take stock of how the company’s leadership is managing.
Since taking over as CEO, Nadella’s approach has been to infuse Microsoft with fresh blood. He did it successfully with Kevin Scott, who came in via the LinkedIn acquisition and shepherded the OpenAI relationship, which despite the bumps is considered a signal win inside the company.
Suleyman’s arrival, though, was about as rocky as many of the initial doubters predicted. First off, it meant demoting the previous head of Bing and other consumer businesses, Mikhail Parakhin, who soon decamped to Shopify to become its CTO.
Suleyman’s new team’s initial mission, according to my sources, was to create its own models that could be subbed in for OpenAI’s within Microsoft’s AI applications. Under the lead of Karén Simonyan, Suleyman’s technical co-founder at Inflection, they embarked on that effort almost immediately, and started pre-training a model dubbed MAI-1. (The Information first reported on the MAI-1 model last year.)
A number of MAI training runs turned up underwhelming results, which is expensive but not uncommon — it’s the cost of playing at the bleeding edge of research. But the problems with MAI sparked acrimony.
As Suleyman’s team absorbed other AI teams scattered throughout the company, more problems cropped up. One incident involved a team that was led by VP of Generative AI research Sebastien Bubeck, which had developed a family of models called Phi. These models were built using synthetic data — training data generated by larger AI models.
Bubeck’s team was involved in a big training run for MAI last year, where it mixed its synthetic data in with more traditional web data. After the results proved disappointing, Simonyan argued that the synthetic data had “contaminated” the process. That kicked off a debate between the Phi and MAI teams over whether synthetic data can actually produce models with real world applications or just ones that can score well on tests.
The disagreement played out on a public Slack channel — a thing that only happened because the Inflection team was allowed to keep using Slack when they joined Microsoft rather than switch over to Teams — and for some members of Bubeck’s team, it felt like an attack.
Not long after, the Phi team was re-orged out from under MAI and put back under Microsoft Research. Bubeck has since left Microsoft for a post at OpenAI, where he’s building up their synthetic data team.
Suleyman has also ruffled feathers at OpenAI. The relationship between Microsoft and its AI partner has had its ups and downs, but on the whole its been highly beneficial for both players. Still, Altman has never liked Suleyman, my colleagues and I previously reported at the Journal.
Last year, as OpenAI was building its much-touted o3 model, Suleyman lashed out at OpenAI’s senior staff in frustration over the lack of access his team was getting to the reasoning model. It’s now a widely reported incident, and my sense is OpenAI doesn’t mind it being out there — suggesting that the bad feelings run in both directions. It’s not entirely fair to blame Suleyman for the state of relations between these two.
What is definitely fair is asking whether MAI can build a successful consumer AI product. On that front, Suleyman’s big day came earlier this month when he finally announced the revamped Copilot, which was designed to be a personal companion that can book flights and remember things about you.
(The announcement was also timed with Microsoft’s 50th anniversary, which in a stroke of bad luck happened to fall two days after Trump’s “liberation day” tariffs. So Suleyman had the honor of rolling the product out amidst the backdrop of flashing red tickers and CNBC anchors melting down. Meanwhile his presentation was interrupted by two employees who accused Microsoft of having blood on its hands for working with the Israeli military; they were escorted from the room and later fired. Happy anniversary Microsoft and good luck with the launch!)
The Copilot announcement didn’t transform the narrative. And at this point, Microsoft is just not in the running to build a model that can compete with the best from OpenAI, Anthropic, Google, and even xAI. The projects that people have mentioned to me feel incremental, as opposed to leapfrogging the competition.
Maybe they don’t need to. In a world where multiple top-of-the-line models exist, there’s less pressure for there to be a Microsoft-made model that reduces its reliance on OpenAI. That wasn’t the case a year ago.
All of that puts even more focus on Suleyman to deliver the thing that Nadella has really been pining for: a hit consumer product. It’s not panic time yet — the CEO is still very enamored by the AI CEO, I hear. But Nadella has a tendency to fall in love with certain executives and then if they fail to measure up, his gaze drifts elsewhere.
If that happens, Suleyman could find himself squarely in the sights of Amy Hood, the CFO, who can be brutal about making cuts if a division isn’t delivering. Leading a product that is getting lapped by ChatGPT isn’t what Suleyman was hired to do.
Without any change, a flat line can mean it’s time to pull the plug.
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