As per the news received, Microsoft is developing in-house artificial intelligence reasoning models that can compete with OpenAI and other rival models. The information was a surprise since Microsoft is a partner of OpenAI and has been using its models in its products. The partnership with OpenAI has been successful. Microsoft has positioned itself as one of the leaders among the big technology companies in AI race. Its seems like Microsoft is challenging OpenAI with this AI Model.
Although Microsoft has worked on some of its own models in the past, like Phi, interestingly, Phi was developed with the help of OpenAI, and it can perform similarly to OpenAI with far less computing power. Microsoft is testing models from xAI, Meta, and DeepSeek as potential replacements for OpenAI. Things are not getting any better for OpenAI lately. They already have a battlefront opened by Elon Musk, with that matter currently being heard in the US court. Microsoft has been using OpenAI in its flagship AI product, 365 Copilot. Copilot’s main attraction was that it used OpenAI’s GPT-4 model.
Last year, in March 2024, Mustafa Suleyman was appointed as CEO of Microsoft AI (MAI). Under his leadership, work was being done to create an alternative to OpenAI so they could start using it in their own product. The main reason is cost-effectiveness in the long run for the company. According to the report, the training has been completed, and the product is performing similarly to the OpenAI and Anthropic on commonly accepted benchmarks. At the same time, work is being done on the reasoning model as well.
It typically uses Chain-of-thought (CoT) techniques to analyze the input as humans do. This process involves calculations, logic, and decision-making. With this, MAI would be able to compete directly with OpenAI. The work to replace OpenAI’s models in Copilot with MAI is already in process. Microsoft is considering releasing the new model as an API (Application Programming Interface) that developers can use to benefit from these models in their own applications.
It is to be noted here that Microsoft has invested $14 billion in OpenAI so far. However, like a smart business entity, Microsoft is not keeping all its eggs in the same basket. OpenAI has had a series of setbacks lately, be it the DeepSeek computing power or the lawsuit by Musk. Now, it seems like they are getting stabbed in the back by their own partner, who established its AI standing using OpenAI itself. However, OpenAI is also being smart and it has already secured a deal with Apple back in June 2024. The deal involves using ChatGPT in Apple products iOS, iPadOS, and macOS. Even Siri would be able to tap into ChatGPT to get help when needed.
Both OpenAI and Microsoft are in an agreement till 2030 . Also, a lot of Microsoft products are using OpenAI, and they aren’t going to be replaced overnight. It is to be noted here that a recent change in their agreement in January 2025 allowed OpenAI to work with other cloud providers like Oracle. It seems like both companies are keeping their options open for now. Things are heating up in AI world and new developments are fast. Everyone is trying to outdo its competitors, and even the partners are not spared. It’s a cruel world out there, and you must always be awake and ensure you safeguard your interests.
