While Apple typically dominates tech headlines in September, other tech giants like Microsoft, Amazon, Google, and Samsung also unveiled new products this month. However, due to Apple's event, Microsoft's Fall Product Launch, known in the industry as the "Surface Event," garnered less attention than expected.
At the event, Windows and Surface took a backseat. It wasn't until 42 minutes into the presentation that CEO Satya Nadella began discussing them, primarily because he focused extensively on artificial intelligence (AI).
Towards the end of the event, Microsoft announced updates to the Windows 11 operating system, with a significant emphasis on the generative AI assistant, Copilot. Copilot is now integrated into the entire Windows operating system and can invoke products like New Bing and ChatGPT. This means users can activate Windows Copilot without opening specific software, simply by clicking an icon in the taskbar or using a shortcut.
This shift signifies Microsoft's transformation from "AI + product" to "AI + operating system."
Behind this transition is Microsoft's effort to rebuild its ecosystem. The global decline in PC shipments during the pandemic not only affected Microsoft's Surface devices but also reduced the revenue from Windows systems installed on PCs. In the 2023 fiscal year, the income from Windows OEM, which refers to the fees PC manufacturers pay Microsoft to install Windows on laptops and PCs, has seen a significant decline for four consecutive quarters.
Prominent tech analyst Ben Thompson noted in his podcast, Stratechery, that after Nadella realized that the Windows system would not drive Microsoft's growth now or in the future, he has been working hard to ensure products like Office, servers, and others are not solely dependent on Windows. Embedding Copilot into the system to change the culture attached to Windows is Nadella's solution, aligning with Microsoft's ethos of "ubiquity" and "horizontal dominance."
Surprisingly, OpenAI is also looking to break free from its existing system dependencies.
According to the Financial Times, OpenAI's CEO Sam Altman recently brainstormed with Apple's former Chief Design Officer, Jony Ive, and SoftBank Group CEO, Masayoshi Son.
While details of this "serious" discussion are scant, insiders suggest that Ive and Altman aim to create an interactive computing device that relies less on computer screens, offering a "more natural, more intuitive user experience." Their inspiration comes from how the touchscreen technology on the original iPhone revolutionized mobile internet interaction. Son's role is likely to provide funding for this collaboration. After several missed opportunities in AI with his Vision Fund, Son hopes to make OpenAI SoftBank's next "Alibaba."
This nascent collaboration hints at broader financial intentions. As one of the highest-valued startups globally, OpenAI is seeking deals to sell its existing shares to Silicon Valley VCs. Potential buyers could include Masayoshi Son, Sequoia, or a16z. Such a deal would immediately bring significant book profits to Microsoft and reduce Microsoft's influence over OpenAI. Currently, Microsoft holds 49% of OpenAI's shares.
While Microsoft has never shied away from its deep ties with OpenAI, it has begun efforts to reduce its cost dependency on OpenAI. According to The Information, Microsoft is internally developing smaller language models than some of OpenAI's flagship large language models. While these in-house conversational AI projects might not perform as well as ChatGPT, they come with lower operational costs, alleviating the expenses of running models like ChatGPT.
Altman has previously stated that he doesn't plan to take OpenAI public or sell it to a single buyer. It's conceivable that if OpenAI collaborates with SoftBank, it's likely to bridge the significant costs associated with developing its large models.
