How Microsoft’s New in-House AI Models Could Rival OpenAI
Microsoft has reportedly begun developing its own AI reasoning models that could compete with those from its partner OpenAI.
According to a report from The Information, a person involved with the programme states that Microsoft has been evaluating AI models from companies including Meta Platforms, xAI and DeepSeek as potential alternatives to OpenAI technology in its Copilot products.
The Information's report, titled ‘Microsoft's AI Guru Plots a Future Without OpenAI’, suggests the company is working to reduce its dependence on OpenAI, with which it has maintained a collaboration since 2019.
Microsoft's AI division, led by Mustafa Suleyman, has reportedly developed and trained a family of AI models referred to internally as MAI.
The Information says that Microsoft's testing and development has focused on how MAI performs across various tasks, including powering its Copilot AI assistants.
Microsoft MAI models demonstrate reasoning capabilities comparable to industry standards
The Information says that Microsoft’s development has centred around how MAI performs on a variety of tasks, including powering the company’s Copilot AI assistants.
Additionally, the company’s use of reasoning models, which typically generate direct answers to show their work and follow a more structured thought process – are particularly suited for applications requiring complex problem solving, such as medical diagnosis in healthcare, scientific research, automated decision making in manufacturing and financial risk assessment.
As a result, by developing its own reasoning models, Microsoft could directly compete with OpenAI, according to The Information's report
OpenAI's o-series reasoning models are currently utilised by Microsoft in its Copilot products and are available in the Azure AI Foundry model catalogue and AI Toolkit for Visual Studio Code.
The Information states that Mustafa’'s team is already experimenting with replacing OpenAI's models with MAI models in Copilot.
Microsoft and OpenAI partnership continues amid internal development efforts
Microsoft began its relationship with OpenAI in 2019.
Since then, the companies have collaborated on AI supercomputing and research to advance and commercialise AI technologies – and through the partnership, Microsoft has invested in OpenAI, providing access to its Azure cloud platform to power OpenAI's research and development while integrating the AI firm's technology into its business and consumer products.
OpenAI's AI models are primarily hosted and operated on Microsoft's Azure cloud platform – and Microsoft incorporates OpenAI's technology in products including Microsoft Office productivity software, GitHub Copilot for coding assistance and Bing Search.
The companies also collaborate on the research and development of new AI technologies, including LLMs and AI supercomputing infrastructure.
In January 2023, when Microsoft announced the extension of the partnership into a third phase, Chief Executive Officer and Chairman Satya Nadella said: “We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratise AI as a new technology platform.
“In this next phase of our partnership, developers and organisations across industries will have access to the best AI infrastructure, models and toolchain with Azure to build and run their applications.”
OpenAI’s Chief Executive Officer, Sam Altman commented on the partnership extension: “The past three years of our partnership have been great. Microsoft shares our values and we are excited to continue our independent research and work toward creating advanced AI that benefits everyone.”
Microsoft expands AI model diversity across product offerings
By developing its MAI models, Microsoft could potentially reduce its reliance on OpenAI technology.
In December 2023, Reuters reported that Microsoft had been adding internal and third-party AI models to its 365 Copilot product.
Citing sources familiar with the work, Reuters stated the company was looking to “diversify from the current underlying technology from OpenAI and reduce costs.”
While the inclusion of OpenAI's GPT-4 model was promoted as a key feature for 365 Copilot when it launched in March 2023, Reuters' source indicated Microsoft was training its own smaller models, including one called Phi-4, to make Copilot faster and more efficient.
Microsoft's decision to develop in-house models comes amid broader industry trends where technology companies are building diverse AI model portfolios to support different applications and use cases.
Speaking at the Morgan Stanley TMT Conference on Tuesday 4 March 2025, Microsoft's Chief Financial Officer Amy Hood addressed the relationship between the two companies: “We're both successful when each of us are successful. I do think everybody is planning for what happens for a decade or two decades. And that's important for both of us to do.
“And what's great is that we're building a really flexible fleet that can be used for any type of workload on a global basis. And we look forward to continuing to be their primary partner and be able to supply them through that agreement and structure through 2030. It's a good thing for both of us.”
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