Microsoft Build – Crystal Clear

Microsoft clarifies its AI ecosystem ambition.

• Although the real action was yesterday, Microsoft used its 2024 Build keynote to lay out its proposition to developers for using Microsoft tools to build AI and it did a far better job of it than Google and in half the time.
• Microsoft’s message was very clear in that it showed the AI technology stack from chip to service and then explained at each level how it provides the best tools and services.
• Its case is quite compelling compared to Google whose AI is just as good but dumped a series of product launches into its presentation and left the audience to figure out what they are and what to do with them.
• Microsoft had very little to announce that was really new but what it did do was advance tools towards general availability and announce new features that allow developers to build and customise more on its core products.
• For example, Microsoft is bringing in AMD to sit alongside Nvidia and its in-house accelerator as well as pretty much every foundation model that is available so that developers can pick and choose what they want to build on and which silicon they wish to execute on.
• Another example is GitHub Copilot which already has 1.8m users and 50,000 organisations engaged with it.
• Here the main news was the launch of extensions meaning that developers can customise the capabilities of their service based on Copilot with pretty much anything that they want.
• On Monday, Microsoft announced Team Copilot which functions like an executive assistant team member that tracks action items, takes minutes, manages a project timeline and so on.
• On Tuesday, Microsoft announced the tools to customise Team Copilot to one’s own specification using Microsoft modules or ones that one builds oneself.
• However, the one place that Microsoft always went back to was Azure AI Studio which is where Microsoft wants the developers to spend all of their time.
• Microsoft does not have a foundation model of its own as everything is based on Open AI’s GPT foundation and this is why, like Nvidia, it is making its play for the AI ecosystem further up the stack.
• Google, OpenAI, Anthropic, Meta and others have invested vast sums in creating their own foundation models and their play for the ecosystem is to lock developers into their models which are quite difficult to swap in and out.
• Microsoft’s position is different in that its proposition is that it does not care which foundation the developer uses as long as the developer uses Azure AI Studio and runs the training and potentially the inference on its infrastructure which is where it will make its money.
• This is how Microsoft intends to become one of the main tool providers for the development of AI and its experience as a tool provider was clearly evident.
• It did a good job of identifying where the use cases in the enterprise are going to be and has moved quickly to offer tools and services that will allow developers or companies themselves to address these use cases.
• These are in line with RFM Research’s conclusions.
• Microsoft might not be a leader in the nuts and bolts of AI or in driving the industry towards general intelligence but it is a leader in providing an easy-to-understand proposition that allows developers to create the AI that they want.
• In the short to medium term, this is going to be more valuable than spending billions on a moonshot and so this cements Microsoft’s position as the leader in the provision of enterprise software and services as AI increases its usage and penetration.
• That being said, Microsoft is very far from being the bargain that it once was and so this is not how I would invest in the AI trend.
• Instead, I would look more laterally like nuclear power or enablers of inference at the edge like Qualcomm (and pretty soon MediaTek) as better ways of gaining exposure.
• I have positions in both and remain comfortable to sit tight.