Microsoft is expanding its flagship AI product, Microsoft 365 Copilot, by integrating both internal and third-party AI models to diversify beyond its reliance on OpenAI’s technology and reduce operational costs, according to sources familiar with the matter.

This marks a shift for Microsoft, a major investor in OpenAI, which previously highlighted its exclusive access to OpenAI’s models as a key advantage. When Microsoft introduced 365 Copilot in March 2023, its use of OpenAI’s GPT-4 model was a primary selling point.

The company now seeks to reduce its dependence on OpenAI due to concerns about cost and performance for enterprise users, the sources said. A Microsoft spokesperson confirmed that OpenAI remains a key partner for advanced AI models, but Microsoft also customizes OpenAI’s models as part of their agreement.

“We incorporate various models from OpenAI and Microsoft depending on the product and experience,” Microsoft stated. OpenAI declined to comment.

Microsoft is training its own smaller models, including the latest Phi-4, and customizing open-weight models to make 365 Copilot faster and more cost-effective. These efforts aim to lower operational expenses and potentially reduce costs for customers, sources said.

Microsoft’s leadership, including CEO Satya Nadella, is closely monitoring these developments.

This strategy aligns with changes in other Microsoft units, such as GitHub, which added models from Anthropic and Google in October alongside OpenAI’s GPT-4. Similarly, its consumer chatbot Copilot now integrates both in-house and OpenAI models.

Microsoft 365 Copilot, an AI assistant for enterprise applications like Word and PowerPoint, is still proving its value to businesses. While adoption among Fortune 500 companies has reached 70%, many enterprises remain in the pilot phase, according to Gartner. Pricing and utility have been cited as potential hurdles.

Despite these challenges, adoption is accelerating. Analysts at BNP Paribas Exane predict that Microsoft will sell 365 Copilot to over 10 million paid users this year. In a November blog post, Microsoft highlighted its growing traction within large enterprises.

Perplexity AI, an artificial intelligence startup, has successfully secured $500 million in its latest funding round, raising its valuation to $9 billion, as reported by Bloomberg. This financing, led by institutional venture partners, was completed in December 2024.

The company’s valuation has seen a meteoric rise, jumping from $1 billion in April 2024 to $3 billion by June 2024 after a strategic investment from SoftBank Group’s Vision Fund 2. The $9 billion valuation now includes the recent funding, underscoring Perplexity’s rapid expansion.

Founded in 2022, Perplexity AI provides real-time information through both free and paid versions of its search tool. The platform has grown to include additional features, such as searching internal files and offering finance-related insights like stock prices and company earnings data.

By March 2024, Perplexity had amassed over 15 million active users. The company also established revenue-sharing partnerships with major publishers like Time and Fortune after addressing earlier plagiarism concerns.

Supported by prominent investors, including Jeff Bezos and NVIDIA, Perplexity AI continues to enhance its technology. The recent acquisition of Carbon, a data connectivity startup, allows users to link apps like Notion and Google Docs directly to the platform.

In a statement, Perplexity outlined its vision: “Carbon will simplify the process for users to connect the data sources that matter to them, enabling Perplexity’s answer engine to integrate diverse information from internal databases, cloud storage, and document repositories. Rather than searching through multiple web pages, apps, or messages, Perplexity will conduct the research, delivering critical insights across sources as part of the answer.”

With fresh funding and strategic initiatives, Perplexity AI is well-positioned for continued growth in the competitive AI market.

xAI has successfully concluded its Series C funding round, securing $6 billion from prominent investors, including A16Z, BlackRock, Morgan Stanley, Fidelity Management & Research Company, Lightspeed, and Sequoia Capital. This brings the company’s total funding to approximately $12 billion.

Strategic investments were also received from tech giants NVIDIA and AMD, bolstering xAI’s plans to scale its infrastructure at an unprecedented pace.

Colossus Supercomputer Expansion
The newly raised funds will support the expansion of xAI’s Colossus supercomputer, which currently operates with 100,000 Nvidia Hopper GPUs. The company plans to double its capacity to 200,000 GPUs by leveraging Nvidia’s Spectrum-X Ethernet platform.

Elon Musk, xAI’s founder, stated that the funding will be utilized to enhance infrastructure, deliver transformative products, and accelerate research into groundbreaking technologies, aligning with the company’s mission to “understand the true nature of the universe.”

Rapid Growth and Market Position
Since its launch in July 2023, xAI has rapidly grown to a reported valuation of $50 billion, emerging as a strong competitor to OpenAI, which is valued at $157 billion. xAI’s growth surpasses other AI startups such as Anthropic ($19 billion valuation) and Perplexity ($2.8 billion valuation).

Key milestones include the construction of the world’s largest AI supercomputer, Colossus, in just 122 days, and its planned expansion to double GPU capacity.

Innovations and Product Development
xAI continues to push the boundaries of AI technology:

• API Launch: In October 2024, xAI introduced an API allowing developers to integrate its AI model, Grok, into third-party applications, extending its functionality across diverse platforms.
• Multimodal Capabilities: Grok now features the Aurora image generation model, enhancing its ability to understand, edit, and create multimodal content.
• Real-Time Insights: Leveraging the 𝕏 platform, Grok offers real-time information with advanced features such as web search and citations.

Grok Expands to iOS and Beyond
To make its cutting-edge AI accessible to more users, xAI is developing an iOS app, as indicated in a recent App Store listing. The app, titled Grok Beta, provides free access to Grok 2, the latest iteration of xAI’s model.

Described as an “AI-powered assistant designed to be maximally truthful, useful, and curious,” the app allows users to:

• Get answers to complex questions.
• Generate vivid images.
• Upload and analyze pictures for deeper insights.

Grok is also available for free through the Musk-owned X social media platform and will soon be accessible via Grok.com.

xAI’s Competitive Vision
Elon Musk, who co-founded OpenAI before departing in 2018, launched xAI to rival ChatGPT and reshape the AI landscape. With significant funding, rapid infrastructure scaling, and continuous innovation, xAI is poised to become a major force in AI, setting the stage for transformative advancements that aim to unlock the mysteries of the universe.