Microsoft’s (MSFT) announcement this week that it will hire key talent from artificial intelligence research firm Inflection to spearhead a new Microsoft AI business will further cement its leadership and ability to strategically navigate the evolving market, Macquarie said in a note emailed Friday.
The brokerage reiterated an outperform rating and $455 price target on Microsoft’s shares.
On Tuesday, the company said it was hiring Mustafa Suleyman, chief executive of startup Inflection AI, and Inflection Chief Scientist Karen Simonyan to lead Microsoft AI, a new organization focused on advancing Copilot and other consumer AI products and research.
Terms of the deal were not disclosed but Reuters reported the moves as a licensing deal with Inflection valued at $650 million. Microsoft declined to comment to MT Newswires on the structure and price of the deal.
“The decision to create a separate AI unit staffed principally by accomplished AI researchers suggests Microsoft investing into its own AI competencies with a focus on driving uptake of profitable generative AI products,” a group of Macquarie analysts including Frederick Havemeyer and Robert Trout said.
With Microsoft’s multi-billion-dollar investment in Open AI, the parent of ChatGPT, and the addition of the Inflection team, Macquarie expects Microsoft to develop products powered by a combination of leading frontier models, such as OpenAI’s, and internally developed or fine-tuned smaller models.
Most of Inflection’s 70 employees will also join Microsoft AI. This rounds out to a “brain trust of the world’s ‘best and brightest’ minds devoted to the research, design, implementation, and reflection around AI over the past several years,” Havemeyer and Trout said.
The new unit will bring balance, rather than displacement, to Microsoft’s OpenAI partnership, according to the analysts. “By essentially carving out Inflection’s leadership and AI researchers from within Inflection, Microsoft has landed the scarcest asset in the AI market today: talent,” they said.