Will Microsoft’s Hush-Hush AI Moves Turn OpenAI Into a Rival?

Microsoft, one of OpenAI’s biggest backers, is developing its own AI reasoning models — a move that could position the company as a direct competitor to its partner, OpenAI.

The tech giant is working on a series of advanced AI reasoning models, internally referred to as MAI, in what appears to be a strategic effort to reduce its reliance on OpenAI’s technology, according to multiple reports. These new models are designed to tackle complex problem-solving tasks and are already undergoing testing as potential substitutes for OpenAI’s systems within Microsoft products, including Copilot, the AI assistant integrated into Microsoft 365, Microsoft Office, Bing Search, and GitHub.

From partner to rival?

Microsoft and OpenAI have worked closely since 2019, with Microsoft investing over $13 billion in the ChatGPT maker. However, the partnership seems to be shifting. Microsoft’s AI division, now led by Mustafa Suleyman, co-founder of DeepMind and Inflection, has been expanding its in-house capabilities.

According to The Information, Suleyman’s team has already trained a family of AI models that perform nearly the same level as OpenAI’s most advanced models, including the o1 reasoning model. These MAI models reportedly excel in reasoning tasks — where AI not only provides answers, but also explains its thought process — a feature particularly useful in fields such as healthcare, finance, manufacturing, and scientific research.

Testing new waters

Microsoft isn’t stopping at its own AI models; it’s also evaluating models from other companies — including Elon Musk’s xAI, Meta, Anthropic, and DeepSeek — as possible backups or alternatives for OpenAI’s models in Copilot. This multi-model strategy suggests Microsoft is moving toward a more diversified AI infrastructure rather than relying solely on OpenAI.

The MAI models are also being tested as potential drop-in replacements for OpenAI’s models within Copilot. If testing proves successful, Microsoft could offer them through a public API later this year, allowing third-party developers to integrate them into their applications — similar to how OpenAI’s models are currently used.

Microsoft is still friends with OpenAI — for now

Despite these developments, Microsoft’s partnership with OpenAI remains intact; however, recent reports indicate some tension between the two, particularly after OpenAI reportedly refused to share technical details about its latest reasoning models with Microsoft.

In January, the companies renegotiated their agreement, allowing OpenAI to use cloud services from providers other than Microsoft’s Azure, as long as Microsoft doesn’t want the business. This change reflects a more flexible approach to their partnership, even as Microsoft continues to invest in its own AI capabilities.

Microsoft CFO Amy Hood recently emphasized that the partnership is still strong: “We’re both successful when each of us is successful,” she said at a recent investor event.

With Microsoft already offering smaller models like Phi and testing the waters with MAI, the company is positioning itself for a more autonomous role in the AI sector. If successful, Microsoft could reduce its reliance on OpenAI while still benefiting from the partnership.

So far, neither Microsoft nor OpenAI has publicly commented on the reports.

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