Microsoft Makes a Deal with Inflection AI

Microsoft has reportedly agreed to give $650 million to Inflection AI stock, primarily to procure its AI software following the giant’s recent hiring of many Inflection’s staff. 

This deal was announced on March 19, and was described as a staff acquisition. The process started when the tech giant decided to employ Inflection’s co-founders Mustafa Suleyman and Karen Simonyan, as well as other employees from the startup. 

In parallel, legal and industry experts have indicated that this agreement with Inflection might attract antitrust scrutiny from US regulators, who are already increasingly inspecting tech giants for their investments and partnerships within the field of AI. 

Now that the California based company operates with a smaller number of staff, it is looking forward to reducing its computing resources, by seeking a refund from its cloud computing partner CoreWave, according to sources familiar with this issue.  

This step is part of its transition to an enterprise-focused business model from a consumer-centric one, aiming to reduce costs related to building AI models.  

Under this agreement, Microsoft will have to pay $620 million in order to license Inflection AI’s models, as well as around $30 million to waive any legal rights related to the mass hiring.  

Also, this agreement guarantees that the startup’s investors will break even, with a small profit on their investment, according to Bloomberg. 

For his part, Mustafa Suleyman, told Bloomberg that despite being able to boast a $4 billion valuation after raising $1.3 in 2023, the company struggled to find an effective business model. 

On the other hand, while boarding on a new direction, Reid Hoffman, a venture capitalist and Microsoft board member, will continue his involvement with Inflection as a director and co-founder. Sean White, formerly Mozilla’s chief research and development officer, will hold the position of CEO. 

Inflection AI stock intends to maintain its patented technology while placing itself as an AI platform for businesses, serving companies globally, including Microsoft. 

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