IMPLICATOR
Microsoft is weighing whether to host a version of DeepSeek, the ultralow-cost Chinese AI provider, on its Copilot platform, a move that would route customers to one of the cheapest models available, potentially at the expense of OpenAI and Anthropic. The consideration, reported by The Wall Street Journal on June 21, surfaced as chief executive Satya Nadella outlined a plan to push AI prices down and steer the race away from a future controlled by a few frontier model-builders. Both OpenAI and Anthropic have accused DeepSeek of distilling, or copying, their top models.
In the past several weeks Microsoft has rolled out a suite of low-cost models and released Copilot Cowork, an autonomous agent that lets users choose which model runs a long task, including cheaper options. The company moved Copilot Cowork out of preview in mid-June with usage-based pricing. Axios earlier reported that Microsoft was considering offering a version of DeepSeek through Copilot.
Key Takeaways
- Microsoft is weighing whether to host China's DeepSeek on its Copilot platform, a step that would push customers toward one of the cheapest models and away from OpenAI and Anthropic.
- In a June 21 WSJ interview, CEO Satya Nadella criticized the AI giants for capturing the technology's value while warning of job losses, and laid out a plan to commoditize frontier models.
- The pivot follows weak Copilot uptake (under 4.5% of 450 million Microsoft 365 seats), a roughly 34% stock slide, and $37.5 billion in Q2 capital spending, up nearly 66% year over year.
- Microsoft stays tied to both labs, with a 27% OpenAI equity stake and up to $5 billion committed to Anthropic, even as it works to turn models into commodities.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
Nadella used the interview to criticize how the race has been run, with a small group of companies capturing the value of the technology while warning about safety risks and job losses. "You can't say, hey, all white-collar jobs are gone and this could even be a weapon and we will use all the power to build data centers," he told the Journal. The public, he predicted, would not tolerate just a few models and companies "doing all of the learning for the world." He did not name OpenAI, Anthropic or Alphabet's Google, the three builders of the most advanced proprietary models.
The pitch follows a difficult stretch for Microsoft's own AI products. Fewer than 4.5% of the 450 million users of its Microsoft 365 suite pay for Copilot features, according to Fortune, and the consumer Copilot chatbot trails ChatGPT, Gemini and Claude. Microsoft's share price fell about 34% between late October and late March, and the company reported $37.5 billion in capital spending in its second quarter, up nearly 66% from a year earlier and above the $34.3 billion analysts had projected.
Without a frontier model of its own at the top of the leaderboards, Microsoft has decided to use its balance sheet to turn models into commodities and sell the layers around them. In an essay posted June 14, Nadella argued that firms need both "token capital," the AI capability a company builds and owns, and human capital, and that the real danger is a handful of models absorbing the expertise of entire industries. He compared that risk to the hollowing out of industrial economies during the first phase of globalization.
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But Microsoft's own costs illustrate the bind. The company is canceling most internal Claude Code licenses in its Experiences and Devices division effective June 30, after per-engineer costs ran between $500 and $2,000 a month and usage reached 84% to 95% by April, according to VentureBeat, which cited Windows Forum. Around the same time, Reuters reported that Microsoft shareholders had filed a proposed class action in Seattle federal court accusing the company of concealing slowing Azure growth and the scale of its AI spending. The suit names Nadella and finance chief Amy Hood among the defendants.
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Microsoft remains one of OpenAI's oldest backers, having committed $13 billion to the startup, and the two recently revised their partnership to give Microsoft a 27% equity stake while ending the exclusivity that had bound OpenAI to Azure. Microsoft also committed up to $5 billion to Anthropic last year and began offering Claude models on Azure, which it used to build Copilot Cowork. A Microsoft spokesman said Nadella's push for a reset is not a "zero-sum game" and that the company will keep nurturing both partnerships.
Other executives have raised similar concerns. Snowflake CEO Sridhar Ramaswamy warned in a February podcast that model makers want enterprise software reduced to "a dumb data pipe" feeding their systems, and Box CEO Aaron Levie wrote in a January LinkedIn post that companies will struggle to differentiate when everyone has access to the same expert intelligence.
Nadella said repairing the race will take more than a better message. "No amount of just narrative is going to do it because where we are now, we have to sort of walk the walk," he told the Journal. "We now have to do the hard work in earning the social permission."
Frequently Asked Questions
Is Microsoft actually hosting DeepSeek?
Not yet. Nadella told The Wall Street Journal that Microsoft is weighing whether to offer a version of DeepSeek on Copilot, and Axios earlier reported the company was considering it. No launch date or terms have been announced.
What does Nadella mean by 'token capital'?
In a June 14 essay, Nadella defined token capital as the AI capability a company builds and owns, paired with human capital. He argued the real risk is a few frontier models absorbing the expertise of entire industries rather than firms keeping that capability in-house.
Why is Microsoft turning against the AI giants it funded?
Microsoft lacks a frontier model atop the leaderboards and faces weak Copilot adoption, a falling share price, and rising AI costs. By commoditizing models and selling the surrounding layers, it aims to compete without owning the strongest model. It still holds a 27% OpenAI stake and an Anthropic commitment.
What did Nadella say about AI and jobs?
He criticized the idea that AI should eliminate white-collar jobs to justify vast data-center spending, saying companies should reorganize work instead. He predicted the public would not tolerate a few models and companies 'doing all of the learning for the world.'
AI-generated summary, reviewed by an editor. More on our AI guidelines.
Marcus Schuler
Editor-in-Chief and founder of Implicator.ai. Former ARD correspondent and senior broadcast journalist with 10+ years covering tech. Writes daily briefings on policy and market developments. Based in San Francisco. E-mail: editor@implicator.ai
