Microsoft’s $650 million deal with Inflection AI

Microsoft will be paying artificial intelligence (AI) startup Inflection $650 million to licence its software, a week after it roped in the company’s two cofounders and most of its staff, as per a Bloomberg report.

As part of a deal struck with Inflection AI, Microsoft will pay $620 million to the company to license and use its AI models. The remaining $30 million will be paid to give up any legal rights the company may hold related to the mass hiring. The financial contours of the deal were first reported by US tech publication The Information.

Inflection AI is using this deal and the licencing fee to provide some investors, including Greylock and Dragoneer Investment Group, one-and-half times the return.

The AI company, valued at $4 billion last year after it raised $1.3 billion with Microsoft as its lead investor, will retain its proprietary technology, it said in a blog post earlier this week. “Our success at training, tailoring and improving the performance of large AI models makes us uniquely well placed to be the AI platform for businesses around the world,” the post read.

On Tuesday, Microsoft announced the hiring of Mustafa Surleyman, cofounder of Google’s DeepMind and Inflection AI, as its consumer AI business head. Karen Simonyan, also a cofounder, and 70 other people were onboarded for Microsoft’s newly created unit Microsoft AI. Suleyman will be the CEO of this vertical, with Simonyan as the chief scientist.

Inflection now plans to shift its business focus. In May, it had launched Pi, its consumer assistant, which impressed users but it only attracted around a million daily users. So, it will now sell its models to enterprise customers.

Experts and industry insiders that this deal, much like other big deals being struck in the tech space, will not go unnoticed by the antitrust regulators in the US.

Microsoft’s partnership with ChatGPT maker OpenAI, another bet by the former to advance in the AI space, also came under scrutiny for breaching antitrust regulation in the US and UK. The tech giant’s deal to purchase video game publisher Activision for $69 billion also faced numerous regulatory hurdles.