Microsoft unveiled two chips at its Ignite conference in Seattle on Wednesday.
The first, its Maia 100 artificial intelligence chip, could compete with Nvidia’s highly sought-after AI graphics processing units. The second, a Cobalt 100 Arm chip, is aimed at general computing tasks and could compete with Intel processors.
Cash-rich technology companies have begun giving their clients more options for cloud infrastructure they can use to run applications. Alibaba, Amazon and Google have done this for years. Microsoft, with about $144 billion in cash at the end of October, had 21.5% cloud market share in 2022, behind only Amazon, according to one estimate.
Virtual-machine instances running on the Cobalt chips will become commercially available through Microsoft’s Azure cloud in 2024, Rani Borkar, a corporate vice president, told CNBC in an interview. She did not provide a timeline for releasing the Maia 100.
Google announced its original tensor processing unit for AI in 2016. Amazon Web Services revealed its Graviton Arm-based chip and Inferentia AI processor in 2018, and it announced Trainium, for training models, in 2020.
Special AI chips from cloud providers might be able to help meet demand when there’s a GPU shortage. But Microsoft and its peers in cloud computing aren’t planning to let companies buy servers containing their chips, unlike Nvidia or AMD.
The company built its chip for AI computing based on customer feedback, Borkar explained.
Microsoft is testing how Maia 100 stands up to the needs of its Bing search engine’s AI chatbot (now called Copilot instead of Bing Chat), the GitHub Copilot coding assistant and GPT-3.5-Turbo, a large language model from Microsoft-backed OpenAI, Borkar said. OpenAI has fed its language models with large quantities of information from the internet, and they can generate email messages, summarize documents and answer questions with a few words of human instruction.
The GPT-3.5-Turbo model works in OpenAI’s ChatGPT assistant, which became popular soon after becoming available last year. Then companies moved quickly to add similar chat capabilities to their software, increasing demand for GPUs.
“We’ve been working across the board and [with] all of our different suppliers to help improve our supply position and support many of our customers and the demand that they’ve put in front of us,” Colette Kress, Nvidia’s finance chief, said at an Evercore conference in New York in September.
OpenAI has previously trained models on Nvidia GPUs in Azure.
In addition to designing the Maia chip, Microsoft has devised custom liquid-cooled hardware called Sidekicks that fit in racks right next to racks containing Maia servers. The company can install the server racks and the Sidekick racks without the need for retrofitting, a spokesperson said.
With GPUs, making the most of limited data center space can pose challenges. Companies sometimes put a few servers containing GPUs at the bottom of a rack like “orphans” to prevent overheating, rather than filling up the rack from top to bottom, said Steve Tuck, co-founder and CEO of server startup Oxide Computer. Companies sometimes add cooling systems to reduce temperatures, Tuck said.
Microsoft might see faster adoption of Cobalt processors than the Maia AI chips if Amazon’s experience is a guide. Microsoft is testing its Teams app and Azure SQL Database service on Cobalt. So far, they’ve performed 40% better than on Azure’s existing Arm-based chips, which come from startup Ampere, Microsoft said.
In the past year and a half, as prices and interest rates have moved higher, many companies have sought out methods of making their cloud spending more efficient, and for AWS customers, Graviton has been one of them. All of AWS’ top 100 customers are now using the Arm-based chips, which can yield a 40% price-performance improvement, Vice President Dave Brown said.
Moving from GPUs to AWS Trainium AI chips can be more complicated than migrating from Intel Xeons to Gravitons, though. Each AI model has its own quirks. Many people have worked to make a variety of tools work on Arm because of their prevalence in mobile devices, and that’s less true in silicon for AI, Brown said. But over time, he said, he would expect organizations to see similar price-performance gains with Trainium in comparison with GPUs.
“We have shared these specs with the ecosystem and with a lot of our partners in the ecosystem, which benefits all of our Azure customers,” she said.
Borkar said she didn’t have details on Maia’s performance compared with alternatives such as Nvidia’s H100. On Monday, Nvidia said its H200 will start shipping in the second quarter of 2024.
Microsoft owns lots of Nvidia graphics processing units, but it isn’t using them to develop state-of-the-art artificial intelligence models.
There are good reasons for that position, Mustafa Suleyman, the company’s CEO of AI, told CNBC’s Steve Kovach in an interview on Friday. Waiting to build models that are “three or six months behind” offers several advantages, including lower costs and the ability to concentrate on specific use cases, Suleyman said.
It’s “cheaper to give a specific answer once you’ve waited for the first three or six months for the frontier to go first. We call that off-frontier,” he said. “That’s actually our strategy, is to really play a very tight second, given the capital-intensiveness of these models.”
Suleyman made a name for himself as a co-founder of DeepMind, the AI lab that Google bought in 2014, reportedly for $400 million to $650 million. Suleyman arrived at Microsoft last year alongside other employees of the startup Inflection, where he had been CEO.
More than ever, Microsoft counts on relationships with other companies to grow.
It gets AI models from San Francisco startup OpenAI and supplemental computing power from newly public CoreWeave in New Jersey. Microsoft has repeatedly enriched Bing, Windows and other products with OpenAI’s latest systems for writing human-like language and generating images.
Microsoft’s Copilot will gain “memory” to retain key facts about people who repeatedly use the assistant, Suleyman said Friday at an event in Microsoft’s Redmond, Washington, headquarters to commemorate the company’s 50th birthday. That feature came first to OpenAI’s ChatGPT, which has 500 million weekly users.
Through ChatGPT, people can access top-flight large language models such as the o1 reasoning model that takes time before spitting out an answer. OpenAI introduced that capability in September — only weeks later did Microsoft bring a similar capability called Think Deeper to Copilot.
Microsoft occasionally releases open-source small-language models that can run on PCs. They don’t require powerful server GPUs, making them different from OpenAI’s o1.
OpenAI and Microsoft have held a tight relationship shortly after the startup launched its ChatGPT chatbot in late 2022, effectively kicking off the generative AI race. In total, Microsoft has invested $13.75 billion in the startup, but more recently, fissures in the relationship between the two companies have begun to show.
Microsoft added OpenAI to its list of competitors in July 2024, and OpenAI in January announced that it was working with rival cloud provider Oracle on the $500 billion Stargate project. That came after years of OpenAI exclusively relying on Microsoft’s Azure cloud. Despite OpenAI partnering with Oracle, Microsoft in a blog post announced that the startup had “recently made a new, large Azure commitment.”
“Look, it’s absolutely mission-critical that long-term, we are able to do AI self-sufficiently at Microsoft,” Suleyman said. “At the same time, I think about these things over five and 10 year periods. You know, until 2030 at least, we are deeply partnered with OpenAI, who have [had an] enormously successful relationship for us.
Microsoft is focused on building its own AI internally, but the company is not pushing itself to build the most cutting-edge models, Suleyman said.
“We have an incredibly strong AI team, huge amounts of compute, and it’s very important to us that, you know, maybe we don’t develop the absolute frontier, the best model in the world first,” he said. “That’s very, very expensive to do and unnecessary to cause that duplication.”
President Trump’s new tariffs on goods that the U.S. imports from over 100 countries will have an effect on consumers, former Microsoft CEO Steve Ballmer told CNBC on Friday. Investors will feel the pain, too.
Microsoft’s stock dropped almost 6% in the past two days, as the Nasdaq wrapped up its worst week in five years.
“As a Microsoft shareholder, this kind of thing is not good,” Ballmer said, in an interview with Andrew Ross Sorkin that was tied to Microsoft’s 50th anniversary celebration. “It creates opportunity to be a serious, long-term player.”
Ballmer was sandwiched in between Microsoft co-founder Bill Gates and current CEO Satya Nadella for the interview.
“I took just enough economics in college — that tariffs are actually going to bring some turmoil,” said Ballmer, who was succeeded by Nadella in 2014. Gates, Microsoft’s first CEO, convinced Ballmer to join the company in 1980.
Gates, Ballmer and Nadella attended proceedings at Microsoft’s Redmond, Washington, campus on Friday to celebrate its first half-century.
Between the tariffs and weak quarterly revenue guidance announced in January, Microsoft’s stock is on track for its fifth straight month of declines, which would be the worst stretch since 2009. But the company remains a leader in the PC operating system and productivity software markets, and its partnership with startup OpenAI has led to gains in cloud computing.
“I think that disruption is very hard on people, and so the decision to do something for which disruption was inevitable, that needs a lot of popular support, and nobody could game theorize exactly who is going to do what in response,” Ballmer said, regarding the tariffs. “So, I think citizens really like stability a lot. And I hope people — individuals who will feel this, because people are feeling it, not just the stock market, people are going to feel it.”
Ballmer, who owns the Los Angeles Clippers, is among Microsoft’s biggest fans. He said he’s the company’s largest investor. In 2014, shortly after he bought the basketball team for $2 billion, he held over 333 million shares of the stock, according to a regulatory filing.
“I’m not going to probably have 50 more years on the planet,” he said. “But whatever minutes I have, I’m gonna be a large Microsoft shareholder.” He said there’s a bright future for computing, storage and intelligence. Microsoft launched the first Azure services while Ballmer was CEO.
Earlier this week Bloomberg reported that Microsoft, which pledged to spend $80 billion on AI-enabled data center infrastructure in the current fiscal year, has stopped discussions or pushed back the opening of facilities in the U.S. and abroad.
JPMorgan Chase’s chief economist, Bruce Kasman, said in a Thursday note that the chance of a global recession will be 60% if Trump’s tariffs kick in as described. His previous estimate was 40%.
“Fifty years from now, or 25 years from now, what is the one thing you can be guaranteed of, is the world needs more compute,” Nadella said. “So I want to keep those two thoughts and then take one step at a time, and then whatever are the geopolitical or economic shifts, we’ll adjust to it.”
Gates, who along with co-founder Paul Allen, sought to build a software company rather than sell both software and hardware, said he wasn’t sure what the economic effects of the tariffs will be. Today, most of Microsoft’s revenue comes from software. It also sells Surface PCs and Xbox consoles.
“So far, it’s just on goods, but you know, will it eventually be on services? Who knows?” said Gates, who reportedly donated around $50 million to a nonprofit that supported Democratic nominee Kamala Harris’ losing campaign.
AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.
Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.
“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.
The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid.
“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.
AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.
Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.