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Notepad

It might not get the same kind of attention as Google and Apple, but Microsoft is still one of the biggest and most powerful tech companies operating today. It runs Azure, one of the biggest cloud computing services, and maintains Windows 11 and the whole Office suite of software. It also makes plenty of Surface hardware and has a whole slew of gaming products, including the Xbox Series X. But the company is ever expanding &mdash; building new hardware, acquiring new game studios, and making sure that even if Microsoft doesn't run your phone, it can touch plenty of the apps on it. 

Microsoft

The latest tech news about the world's best (and sometimes worst) hardware, apps, and much more. From top companies like Google and Apple to tiny startups vying for your attention, Verge Tech has the latest in what matters in technology daily.

Tech

Artificial intelligence is more a part of our lives than ever before. While some might call it hype and compare it to NFTs or 3D TVs, AI is causing a sea change in nearly every part of the technology industry. OpenAI&rsquo;s ChatGPT is arguably the best-known AI chatbot around, but with Google pushing Gemini, Microsoft building Copilot, and Apple working to make Siri good, AI is probably going to be in the spotlight for a very long time. At The Verge, we&rsquo;re exploring what might be possible with AI &mdash; and a lot of the bad stuff AI does, too.

Artificial Intelligence

OpenAI kicked off an AI revolution with DALL-E and ChatGPT, making the organization the epicenter of the artificial intelligence boom. Led by CEO Sam Altman, OpenAI became a story unto itself when Altman was briefly fired and then brought back after pressure from staff and Microsoft, an investor and close partner.

OpenAI

Featured Stories

If the stars align, we should see OpenAI&rsquo;s next &lsquo;Orion&rsquo; AI model by the end of the year.

Photo of Satya Nadella standing in front of a sign that reads Microsoft loves OpenAI

Verge Deals

Microsoft is getting ready to host OpenAI&rsquo;s next model, just as reports emerge describing unprecedented tension in their complex relationship.

We just exclusively revealed that Orion, OpenAI&rsquo;s next model, is set to be released by the end of the year. A source familiar with Microsoft&rsquo;s AI plans tell me that engineers inside the company have been preparing to host OpenAI&rsquo;s Orion model in recent weeks.

Most of the engineers involved in the project haven&rsquo;t been briefed on the exact details of OpenAI&rsquo;s model plans in an effort to keep the model secret before an official announcement is made. Microsoft declined to comment for this story.

I understand OpenAI has requested access to more of Microsoft&rsquo;s servers that host Nvidia&rsquo;s more powerful H100 GPUs, instead of the A100 GPUs that OpenAI has largely been using so far. Nvidia&rsquo;s H100 chip improves AI inferencing performance and is better at training AI models, making it an ideal candidate for a next-generation OpenAI model.

While Microsoft engineers prepare server capacity for OpenAI&rsquo;s Orion model, there are signs that the once-close relationship between the two companies has hit a rocky patch. At the center of the tension is the costly computing power and server capacity required to build and run OpenAI&rsquo;s models. The New York Times reports that OpenAI has been complaining that Microsoft isn&rsquo;t providing the AI startup with enough computing power to achieve its aim of artificial general intelligence (AGI) &mdash; software with human-like intelligence.

OpenAI has been trying to renegotiate the multibillion-dollar deal it secured with Microsoft nearly two years ago as a result. The original deal turned Microsoft into the exclusive cloud partner for OpenAI. Microsoft&rsquo;s Azure cloud services power all OpenAI workloads across products, API services, and research. The New York Times reports that Microsoft agreed to an exception in the contract to allow OpenAI to sign a $10 billion deal with Oracle for additional AI servers earlier this year. OpenAI&rsquo;s deal with Oracle was positioned publicly in June as a way to &ldquo;extend the Microsoft Azure AI platform&rdquo; as Microsoft continues to provide the software that runs on Oracle&rsquo;s hardware.

Microsoft has also been balancing how much GPU power it allocates to OpenAI against its own demands internally and for its paid AI services through Azure OpenAI. Business Insider reported earlier this year that Microsoft is planning to stockpile up to 1.8 million GPUs by the end of 2024, but I&rsquo;m told that Microsoft wants to get closer to 3 million by the middle of 2025.

Microsoft&rsquo;s reliance on OpenAI models has positioned it as a leader in the AI era through products like Microsoft 365 Copilot and GitHub Copilot. The partnership has also benefited OpenAI with its ChatGPT launch, but it does mean Microsoft could lose out in the long term. A key tenet of Microsoft&rsquo;s partnership with OpenAI stipulates that if the startup achieves AGI, Microsoft will no longer have access to OpenAI&rsquo;s technologies. That could put Microsoft at a competitive disadvantage if OpenAI achieves AGI in the future or even if one of OpenAI&rsquo;s many competitors manages to get there first. Microsoft&rsquo;s OpenAI investment was originally triggered by fears that it was years behind Google&rsquo;s AI efforts, so it&rsquo;s unsurprising that the company would be hedging its bets with OpenAI.

Another complicated part of Microsoft&rsquo;s OpenAI relationship is how its giant investment translates into equity in a for-profit company. OpenAI started off life as a nonprofit organization, but it&rsquo;s quickly transitioning into a for-profit corporation after closing funding rounds that value it at $157 billion. The Wall Street Journal reports that both Microsoft and OpenAI have hired investment banks to advise them on governance rights and how much of the restructured OpenAI that Microsoft will own.

Microsoft has invested more than $13 billion in OpenAI since 2019, and it&rsquo;s entitled to up to 49 percent of the for-profit arm of OpenAI&rsquo;s profits once Microsoft is made whole on its initial investment, according to The Wall Street Journal. Beyond profit, I understand that Microsoft is currently entitled to a part of OpenAI&rsquo;s revenue, too. These close ties will make it difficult during Microsoft and OpenAI&rsquo;s equity negotiations, particularly as antitrust regulators have been increasingly looking at Microsoft&rsquo;s investments in OpenAI.

For all the close ties, OpenAI and Microsoft also look increasingly like they&rsquo;re competing with each other. Microsoft listed OpenAI as a direct competitor for the first time in an SEC filing in August, just months after OpenAI released GPT-4o, a faster model that it made free to all ChatGPT users. The GPT-4o release surprised some people at Microsoft, according to sources, because it undermined Microsoft&rsquo;s own paid-for AI services on Azure, which include speech and translation features.

GPT-4o includes real-time translation and greatly improved speech capabilities, and it&rsquo;s half the price and twice as fast as GPT-4 Turbo. The surprise release had Azure customers wondering why they&rsquo;d pay extra for Microsoft&rsquo;s AI services when GPT-4o can do it faster and better.

OpenAI also sells ChatGPT Team and Enterprise to businesses, while Microsoft tries to tempt them into buying Copilot licenses powered by OpenAI&rsquo;s various models. OpenAI&rsquo;s continued transition to a for-profit company will surely complicate this competition further.

Microsoft also appears to be trying to delicately balance its OpenAI relationship and the company&rsquo;s own ambitions to build competitive AI models. Mustafa Suleyman, the Google DeepMind cofounder who is now CEO of Microsoft AI, is overseeing Microsoft&rsquo;s long-term efforts to replace OpenAI models, according to The New York Times.

Microsoft is now preparing new APIs for search, vision, and speech recognition that will connect to OpenAI&rsquo;s GPT-4o model, according to a source. These new APIs could launch as soon as Microsoft&rsquo;s Ignite conference in November. How Microsoft positions them will be an interesting test for its increasingly complex OpenAI relationship.

---

The pad:

* Discord is getting even better on Xbox. Microsoft has started testing a change to the way Discord works on Xbox, allowing you to directly voice chat with friends. The feature is available to Alpha and Alpha Skip-Ahead testers right now and shows up inside the &ldquo;Parties & chats&rdquo; section of the Xbox dashboard.
* Microsoft&rsquo;s 2024 diversity and inclusion report is now live. Microsoft appears to be struggling to retain women and minority employees, according to its latest diversity and inclusion report. Bloomberg reports that Microsoft&rsquo;s female, Black, and Latinx employees are &ldquo;leaving at an increasing rate,&rdquo; up from departure rates in its 2023 report. Diversity and inclusion is a key measurement for Microsoft, with the company linking its efforts to employee reviews, too.
* Windows on Arm gets more apps and improved audio support. At Qualcomm&rsquo;s Snapdragon Summit this week, the chipmaker revealed that Blender, Affinity Photo 2, and Capture One are all getting improved Windows on Arm support. A bunch of musician software is also coming to Windows on Arm, including Steinberg Cubase, Nuendo, Cockos Reaper, and Reason. Microsoft is also committing to low-latency USB audio driver support in Windows and MIDI 2.0 support.
* Microsoft&rsquo;s new Copilot AI agents arrive next month. A public preview of Microsoft&rsquo;s new autonomous AI agents will be available in Copilot Studio next month. Microsoft is also adding 10 new autonomous agents in Dynamics 365, as the company looks to AI agents to let businesses create virtual employees that automate tasks. I&rsquo;m sure we&rsquo;ll hear more about Copilot agents and features at Microsoft Ignite in November, too.
* The new Outlook is getting custom AI themes soon. Starting next month, you&rsquo;ll be able to use Copilot to generate custom themes for Outlook. These themes will be available across desktop, the web, iOS, Mac, and Android. You&rsquo;ll need a Microsoft 365 Copilot license to use this feature, though.
* Microsoft says Russia, Iran, and China are ramping up election influence efforts. It&rsquo;s less than two weeks until the US election, and Microsoft is warning of &ldquo;sustained influence efforts by Russia, Iran, and China aimed at undermining US democratic processes.&rdquo; The groups continue to use generative AI in their content, and &ldquo;Russian actors have notably attempted to target the Harris-Walz campaign by attacking the candidates&rsquo; characters.&rdquo;
* While we wait for an Xbox handheld, here&rsquo;s an Xbox handheld. I&rsquo;m still waiting on Microsoft to tease or announce an Xbox handheld, but someone has decided to take matters into their own hands. X user Redherring32 has spent four months trimming an original Xbox motherboard down and has built custom PCBs to put it all together inside of a handheld. It&rsquo;s impressive work &mdash; and even more impressive that it&rsquo;s being open sourced, too.
* Microsoft and OpenAI are giving news outlets $10 million to use AI tools. A select group of media outlets has been awarded grants of up to $10 million to try out AI tools in the newsroom. Microsoft and OpenAI are giving away cash and &ldquo;software and enterprise credits&rdquo; to Newsday, The Minnesota Star Tribune, The Philadelphia Inquirer, Chicago Public Media, and The Seattle Times. The outlets will receive a grant that they can use to hire a fellow for two years who will work to implement AI tools using Microsoft Azure and OpenAI credits.
* Windows 11 updates now install significantly faster and use less CPU. Microsoft&rsquo;s big 24H2 update for Windows 11 includes lots of useful and obvious improvements, but there&rsquo;s also a big change to Windows Update behind the scenes. Future updates to version 24H2 will now install significantly faster, require less CPU usage, and mean you end up restarting your PC faster.&nbsp;
* Qualcomm cancels its miniature Windows on Arm PC. Qualcomm&rsquo;s mini Arm PC looked like an interesting alternative to the Mac Mini for some, but the Snapdragon Dev Kit has been a disaster. Qualcomm has been struggling to ship the mini PC for months now, after originally planning to release it in June alongside the chips that powered the first wave of Copilot Plus PCs. Now, it has canceled the hardware, even though some developers have already received units and reviewed them. There&rsquo;s speculation that a problem with the HDMI port is behind the struggle to ship the devices and the decision to ultimately cancel them.
* Windows testers can now try out the Photos super resolution feature on Copilot Plus PCs. If you own a Copilot Plus PC, you can now try out the new &ldquo;super resolution&rdquo; feature inside the Photos app on Windows 11. It&rsquo;s designed to enhance low-quality photos using AI, but I&rsquo;ve been testing it and haven&rsquo;t found the results very compelling. If you&rsquo;ve seen better results, please email me to let me know (notepad@theverge.com).&nbsp;
* Microsoft has a refreshed Xbox Wireless Headset with a better mic and improved battery life. A new refreshed Xbox headset went on sale earlier this week, priced at $109.99. The updated model has a slightly tweaked design on the outside, but the upgrades are mostly all on the inside. Microsoft has upgraded the microphone, so it now includes auto-mute and voice isolation to minimize background noise. The battery life has also been improved from 15 hours to 20 hours. You also don&rsquo;t need to purchase a Dolby Atmos license for this headset to use it on an Xbox, as it&rsquo;s included in the price.
* Microsoft&rsquo;s annual shareholder letter is all about relevance and reinvention. Microsoft CEO Satya Nadella has penned his annual letter today, and it makes it clear Microsoft has three priorities: security, AI, and managing costs. Interestingly, the letter also mentions &ldquo;a new category of Copilot devices&rdquo; that includes the Copilot Plus PCs. I attended Microsoft&rsquo;s AI tour in London earlier this week, where Nadella also mentioned this idea of &ldquo;Copilot devices.&rdquo; It makes me think Microsoft is contemplating other Copilot hardware. In a Notepad issue earlier this month, Windows and Surface chief Pavan Davuluri told me that Microsoft now has the &ldquo;permission to look at other form factors and devices&rdquo; thanks to AI agents being more complete than they were during the Cortana era of devices.

---

Thanks for subscribing and reading to the very end. I am still interested in what you want to see in Windows 12? You can reach me via email at notepad@theverge.com.&nbsp;

If you&rsquo;ve heard about any of Microsoft&rsquo;s other secret projects, you can also speak to me confidentially on the Signal messaging app, where I&rsquo;m tomwarren.01. I&rsquo;m also tomwarren on Telegram if you&rsquo;d prefer to chat there.


If the stars align, we might see OpenAI&rsquo;s next &ldquo;Orion&rdquo; AI model soon.

Microsoft prepares for OpenAI’s next model as their relationship strains

Microsoft prepares for OpenAI’s next model as their relationship strains

If the stars align, we should see OpenAI’s next ‘Orion’ AI model by the end of the year.

Start your Notepad free trial now to continue reading

Already a Notepad subscriber?Sign in

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Microsoft prepares for OpenAI’s next model as their relationship strains

Microsoft prepares for OpenAI’s next model as their relationship strains

If the stars align, we should see OpenAI’s next ‘Orion’ AI model by the end of the year.

Share this story

Start your Notepad free trial now to continue reading

Already a Notepad subscriber?Sign in

Elon Musk and Vivek Ramaswamy have spelled out their plans for DOGE

DOJ says Google must sell Chrome to crack open its search monopoly

Jaguar is now JaGUar

Peak Design’s Outdoor Backpack is a more versatile everyday bag

The Hyundai Ioniq 9 is a three-row electric SUV with room to grow

More from this stream Turmoil at OpenAI: what’s next for the creator of ChatGPT?

OpenAI plans to release its next big AI model by December

Departing OpenAI leader says no company is ready for AGI

Former OpenAI CTO Mira Murati’s next move: another AI startup.

OpenAI was a research lab — now it’s just another tech company