$80 billion didn’t help: Microsoft acknowledges DeepSeek’s superiority

Microsoft is radically rethinking its artificial intelligence strategy following DeepSeek’s impressive breakthrough. The corporation’s head, Satya Nadella, admitted that the achievements of a small team of developers have set a new benchmark of success for the tech giant.

In January, Microsoft quickly integrated the DeepSeek R1 model into Azure. DeepSeek’s success is particularly notable because the company managed to optimize performance at a level below Nvidia’s CUDA layer, which significantly increased the efficiency of their AI models.

“The most impressive thing about DeepSeek is that it’s a beautiful reminder of what 200 people united by one idea can achieve,” Nadella said during a corporate meeting, responding to a question about Microsoft’s competitiveness in AI. “And what’s especially important – they didn’t stop at the level of a research or open-source project, but created a product that became number one in the App Store. For me, that’s a new standard.”

Microsoft, despite investing $80 billion in AI, access to the latest OpenAI models, a large-scale advertising campaign during the Super Bowl, and updating the Copilot design with voice and visual features, has not yet achieved similar success. While ChatGPT regularly ranks first among free applications, Copilot is often outside the top 100.

In response to these challenges, Microsoft introduced its own Muse model, trained on the Xbox game Bleeding Edge to generate gameplay. The corporation plans to use Muse to help Xbox developers prototype games and optimize them for modern hardware.

Jay Parikh, head of the new CoreAI engineering group at Microsoft, emphasized the need to reconsider internal work organization: “Considering what DeepSeek achieved with 200 people… it makes us think about how we work together within the company, where we have many organizational boundaries.”

The key challenge for Microsoft, besides creating a popular application, will be the ability to quickly respond to the emergence of new models and develop its own breakthrough technologies, as demonstrated during the integration of DeepSeek. In the near future, some interactive AI features created with Muse will appear in Microsoft Copilot Labs, which could make the product more attractive to the mass user.