Microsoft is one of the early backers of OpenAI, and has repeatedly hawked products like Copilot by touting their access to the latest ChatGPT models. Now, it seems Microsoft is looking to push its own AI models in the popular software suite, while also developing a rival to OpenAI’s reasoning models in the ”GPT-o” family.
As perThe Information, employees at Microsoft’s AI unit recently concluded the training of “a new family of AI model” that are currently in development under the “MAI” codename. Internally, the team is hopeful that these in-house models perform nearly as well as the top AI models from the likes of OpenAI and Anthropic.
Under the leadership of its AI chief, Mustafa Suleyman, Microsoft is launching this initiative to trim down its dependence on OpenAI and develop its own AI stack forCopilot applications. The developments are not surprising.
Steadily building its own stack
In the last week of February, Microsoft introduced new small language models called Phi-4-multimodal and Phi-4-mini. They come with multi-modal capabilities, which means they can process text, speech, and vision as input formats, just like OpenAI’s ChatGPT andGoogle’s Gemini.
These two new AI models are already available to developers via Microsoft’s Azure AI Foundry and third-party platforms such as HuggingFace and the NVIDIA API Catalog. In benchmarks shared by the company, the Phi-4 model is already ahead ofGoogle’s latest Gemini 2.0 series modelson multiple test parameters.
“It is among a few open models to successfully implement speech summarization and achieve performance levels comparable to GPT-4o model,” Microsoft noted in itsblog post. The company is hoping to release its ”MAI” models commercially via its Azure service.
Rivalry, and openness to rivals
Aside from testing in-house AI models for Copilot, Microsoft is also exploring third-party options such as DeepSeek, xAI, and Meta.DeepSeek recently made wavesby offering a high performance benchmark at a dramatically lower development cost. It has already beenadopted by numerous companiesand recentlyclaimeda theoretical cost-to-profit ratio of over 500% on a daily basis.
Today, we are advancing our AI ambitions with the release of DeepSeek R1 7B & 14B distilled models for Copilot+ PCs via Azure AI Foundry. This is the next step on our journey to continue to make Windows the platform for AI, seamlessly integrating intelligence from the cloud to…pic.twitter.com/QaUYrlMIt6
— Pavan Davuluri (@pavandavuluri)August 02, 2025
Aside from developing its own AI models to replace OpenAI’s GPT infrastructure for Copilot, Microsoft is also reportedly working on its own reasoning AI models, too. This would pit Microsoft againstOpenAI products such as GPT-o1as well as Chinese upstarts such as DeepSeek, both of which offer reasoning capabilities.
Apparently, the work on an in-house reasoning model has been expedited due to strained relationships between Microsoft and OpenAI teams over technology sharing. According to The Information, Suleyman and OpenAI have been at odds over the latter’s lack of transparency regarding the intricate workings of its AI models such as GPT-o1.
Reasoning models are deemed to be the next frontier for AI development, as they offer a more nuanced understanding of queries, logical deduction, and better problem solving capabilities. Microsoft also claims that its Phi-4 model delivers stronger language, mathematical, and visual science reasoning chops.
