Microsoft cements its AI lead with one hosting service to rule them all

Microsoft became the world leader in AI by investing $13 billion in OpenAI, creator of ChatGPT, then using ChatGPT as the engine behind its Copilot AI assistant, which it has integrated into just about every product it creates.

But that was just the first phase of Microsoft’s AI plans. Now it’s launched the next one: hosting AI models and services from the world’s biggest AI companies and startups, essentially its competitors. Microsoft says it’s hosting more than 1,900 AI models, from Meta’s Llama AI, to Musk’s xAI, to European startups Mistral and Black Forest Labs, to China’s DeepSeek and beyond.

That way, even if Copilot doesn’t pan out the way Microsoft hopes, it will share in its competitors’ successes. This strategy likely guarantees that Microsoft will remain the world’s biggest AI company.

It’s all about the data centers

Microsoft’s data centers have, from the start, been key to its AI strategy. Thanks to its deal with OpenAI, OpenAI runs its workloads on Microsoft’s Azure cloud platform. When businesses subscribe to OpenAI’s ChatGPT enterprise service, Microsoft gets a portion of the revenue, thanks to its cloud services.

To capitalize on that business model, Microsoft in 2023 launched its Azure OpenAI service, which lets Azure customers build genAI apps using OpenAI’s models. Some 60,000 customers have signed up with Microsoft for the service, according to The Motley Fool.

Microsoft’s arrangement with a wide variety of AI companies supercharges that model and reduces the company’s reliance on OpenAI as a partner. Just before Microsoft’s annual Build developers’ conference in mid-May, Microsoft announced it would be hosting Elon Musk’s Grok AI models (called xAI) on its Azure AI Foundry service. In addition to hosting xAI and OpenAI, the service hosts Meta’s AI Llama models and many others.

That way, Microsoft piggybacks onto the success of its competitors — if those competitors get more customers, Microsoft succeeds as well.

 That’s only part of the company’s AI plans. At its Build conference last week, it described in detail its vision for allowing businesses to create AI agents to perform a wide range of tasks. At the center of that vision is Microsoft’s Azure AI Foundry, which lets businesses create agents using any one of the 1,900 AI services it hosts — or even build agents by combining several of those services.

In that way, businesses won’t have to subscribe individually to any one AI service. Instead, they can subscribe to Microsoft’s Azure AI Foundry and pick whichever agents they want to build what they need. So if enterprises want to use AI tools from a Microsoft competitor, Microsoft still wins, because enterprises can get the tools straight from Microsoft. And Microsoft also wins because its Azure AI Foundry has become the place for customers to go when they want to build agents using multiple AI services at the same time.

Microsoft also announced at Build that it’s adding agents that can write code on the company’s GitHub service, used by many businesses and software companies to manage their code bases. Already, OpenAI and Google-backed startup Anthropic have their agents on GitHub. So in yet one more way, Microsoft is piggybacking onto the success of its competitors.

Where’s Amazon in all this?

All this happening even though Amazon, not Microsoft, is the world’s biggest cloud provider. (Microsoft is slowly closing the gap with the cloud leader, though.) You would expect that Amazon would use its long-dominant market position to sew up hosting AI services in the way Microsoft has been doing.

Amazon has tried but has not had nearly the same success as Microsoft. Amazon Bedrock competes directly against Microsoft’s Azure AI Foundry but hosts far fewer AI models.

In this head-to-head battle, there’s no doubt Microsoft will win. An analysis by a provider of AI-powered banking solutions concludes that Microsoft’s offering is far better for enterprises, better for those who want access to AI chatbots, and better for data analytics. The analysis also concludes that Microsoft’s services are more cost-effective. Bedrock, the report concludes, is better only for startups and development-focused companies.

Microsoft has been capitalizing on its enormous enterprise footprint — it’s using its entire product line, from Microsoft 365 to Azure, to sell existing enterprise customers on using Azure AI Foundry services. Amazon has no way to compete against that.

The upshot

The bottom line is that Microsoft will remain the world’s most valuable AI company and will probably even extend its lead. No other company offers nearly as extensive a range of AI tools, and with Microsoft’s one AI hosting service to rule them all, that shows no sign of changing.

The company has found the ideal “heads-I-win-tails-I-also-win” strategy. From here on in, the only battle will be for second place.