Let's get started with the show. Our first guest tonight is someone we've been very excited about. We've been trying to get him on the show for many years. He finally agreed and he's here tonight. Everyone, please give a warm welcome to Satya Nadella, CEO of Microsoft.
Now, Satya, I have to start by making a confession, which is that I have not been a regular user of a Microsoft AI product since 2023, when one of them tried to break up my marriage. Unsuccessfully, I should add. My wife is right there.
Those were the days when we didn't have to think about a world without guardrails.
But so much has been happening at Microsoft with AI since then. So just catch us up — for people who may not have tuned in a little while, what have you guys been up to in AI?
Yeah, I mean, look, the fundamental thing that I feel we're about to move from is not talking about AI as a one thing, to sort of having even a mental picture of what is an ecosystem that is sort of driven by AI. Right? So today, if you think about it, even since when you first used Sydney to now, it has been about frontier models. You sort of talked about Fable, what have you. But if we are ever going to transition to an economy that is driven by AI, it can't be about one model. It can't be about three firms. It has to be something that's broadly felt, where the economy is at the frontier, not a firm or a model is at the frontier. So Microsoft, as a platform company, to me, that's what we are up to, right? So to me, we had our developer conference last week. It was all about, hey, can we build the platform and the tools where every enterprise in every country can operate at the frontier. To me, that's the question. To be saying, hey, my model does this, but the economy is growing at 2% means this is not going to end well unless we sort of really get to a place where the economy is inflecting in terms of its economic growth and it's broadspread, because the frontier benefits are. That's what happened in electricity and every other technology which was a general-purpose technology.
Let me ask about one of the platform shifts that you signaled at Build last week when you announced Project Solara. You said it would be agent-first hardware, kind of next-generation set of devices that would have agents running them. Tell us a little bit more about that, what that looks like. Can you give us an example of maybe what a Project Solara device would look like?
Two things we did at Build which were interesting, right? One was we took the PC itself. In fact, Jensen had done it the previous night at Computex, where he talked about, you know, the picture — one of my favorite pictures was Jensen with the desktops, the laptops, because he obviously had the RTX chip, which is a new SoC with essentially a petaflop of compute right on their PC. So that was about new functionality coming to the old form factor. Right? So think about what I describe as unmetered intelligence. Right? So the fact that you can have a Windows computer that can run a one-trillion-parameter model locally, I think, is going to be very needed if you're ever going to have agents running 24 by 7. But then the question it sets up is, in a world where we have these models and these agents that are long-running, can I have like a badge? Right? If I'm a nurse in a hospital and I'm walking from station to station, can I just take out this device which can scan, which can input, which can take my speech output and turn it into a prompt? That is what I think an agent-first device looks like, right? So it's sort of really a new — the centrality of the phone, I think, is still going to be there for a lot of apps that we use, but in an agent world, you kind of have that ambient intelligence that is like a sense of field that then works with your models. And so that's what our goal is: to invent the new form factors that are not beholden to the old form factors for this functionality.
It's super interesting and I want to hear a lot more about it. We have many more questions about AI, but I wanted to ask about one more device that has been in the news today, which is the Xbox. The leaders of the Xbox division put out a memo today saying that we should expect a hard reset of Xbox coming soon. They said that there are massive increases in the prices of components and that Xbox might need a new business model. So as a big gamer who's enjoyed many happy hours on Xbox, I have to ask: what is your strategy for Xbox?
Yeah, so look, in fact, this is the 25th year of Xbox. And we're very thrilled about the progress we have. I mean, gaming, in an interesting way, at Microsoft is older than even Windows and Office, right? The first app we built was the flight simulator. And so it's got a long heritage. Xbox itself has been there for 25 years. The challenge now for us is to think about how do you innovate both in hardware as well as in the games going forward in a world, in an economically viable way. Right? I think one of the things that Asha, who has just taken over Xbox, put out is that we've invested a lot. No one can accuse Microsoft of not having invested for the last 25 years. And now we have to turn this into a sustainable business that delivers what is fundamentally one of the best sources of entertainment. Still, the challenge we have is we've not been monetizing that entertainment. In fact, if anything, we've been subsidizing that entertainment. In fact, like, there's more monetization of Xbox games happening on YouTube than at Microsoft. And so that doesn't mean we go do things that are unnatural. We want us to do what is really our job, which is to build great games, build great hardware, but we've got to do it in an economically sustainable way. So I think Asha is really 100 days in, and she put out a post saying in the next 100 days she's going to take a fresh look and make sure we deliver on what our fans expect of us, both on the hardware side or on the publishing side.
I mean, can you give us just any more detail? Like, when I hear that, I think, okay, so maybe like the Xbox gets way more expensive, the games get way more expensive. Is there any sort of like carrot you can offer the gamers?
I think we have to find ways to deliver the games in which it's economically relevant for the customer and for us. So today there's an issue, in fact, unfortunately, because of what's happening with the cloud and AI, the prices have gone up, right? It's happening with PCs, it's happening with phones, Xbox is impacted as well. So the scarcity of the semiconductor supply and memory in particular is having a massive impact on consumer electronics all up. That's a temporal thing that I think we'll get through. It is not going to be permanent, but there is a permanent thing, which is what's the Xbox model going forward. And that's where, if you think about it, like PCs and consoles both have their place. Obviously, mobile has people playing elsewhere, and so we have to now bring it all together while staying true to what we've always done.
Satya, I want to take you back in a time machine. The year is 2023. The board of OpenAI has just fired Sam Altman, one of Microsoft's biggest partners. You and your team spend a harried weekend trying to pull together an entirely new division of Microsoft, Microsoft Advanced AI Research, to sort of catch the employees that are making a mass exodus from OpenAI. You're ordering laptops, you're opening up an office in San Francisco so that all these people have a place to go work. The company looks like it's on the verge of collapse. And then nothing happens. Then Sam gets rehired and OpenAI stands back up on its feet. And I want to present you, as part of this time machine experiment, with a piece of rare merchandise which I recently acquired from an OpenAI employee, which is a Microsoft Advanced AI Research sweatshirt. To be clear, this division never existed. And I was told by the person who made this that they had to sort of fudge a little bit on the copying and printing shop application, which made them prove that they were a Microsoft employee to get this. But this is for you if you ever want to take that walk down memory lane.
Oh man, that weekend — I'll remember that forever, and thank you for this. But all I remember, quite frankly, of the weekend is India getting thrashed by Australia in cricket. That was the more tragic thing.
So if that had happened in the world where all of these OpenAI employees end up working at Microsoft in a new advanced AI research division run by Sam Altman and Greg Brockman, in that world, is Microsoft better or worse off with AI than it is today in this world?
Look, we are thrilled that Greg and Sam made it back to OpenAI, and they are where they are, and they're now, as you said, filed S-1 or what have you. And look, it's fascinating, right? When we initially took the bet on OpenAI, it was a nonprofit entity that had created a for-profit unit and said, 'Hey,' they went and shopped around and said, 'Who can back our crazy idea that intelligence is log of compute?' And quite frankly, there were lots of people that were at Microsoft at that time who thought this is nuts. But you know, we said, I think this is a worthwhile thing to back. And quite frankly, we changed, I think, and they changed through their work, and OpenAI through their work, the world. And here we are in 2026, and we're thrilled about it.
You guys recently renegotiated your deal between OpenAI and Microsoft, and I understand what OpenAI got out of that deal. They got the ability to work with multiple cloud providers, to be a little bit more open about how they commercialize their technology. What did Microsoft get out of the revision of that deal?
I mean, we have a lot of interests in OpenAI. We're obviously on their cap table, and they're a customer of ours, a large one. They're a source of IP for us, all the way to 32, and so all of the things. And at the same time, we have the ability and the flexibility to reuse the IP, build our own IP. We just last week launched MAI models, which have hill-climbed from the ground up. We published, in fact, the paper, which I think should help people even get the capability we have, especially if you take those two thoughts, right, which is: here is, you know, intelligence is log of compute, and here is a pure-lineage model from Microsoft that climbed all the way. That means that we now have the ability to keep going. And to us, and our infrastructure, I must mention that we wouldn't have been where we are with even Azure but for that close partnership with OpenAI. So we have the compute, we have now the model, and we have still the partnership.
Let's talk about those models. Is your goal to make a frontier best model in the world? And if so, what's the strategy for overtaking ChatGPT, Gemini, Claude?
Yeah. So I think the way I would say is our real goal is to get everyone across the ecosystem to the frontier. So we're going to take a slightly different take in saying, for example, if you think about how does one build a frontier model — you hill-climb, you RL, and then you need data, right? So at this point we have saturated the data, and so that means you're basically hoovering the data from every place, right? So the question is, what if you turned that around and said, no, there's a base model that has reasoning, that has the agent loop, but you can bring it into your RL, every company, right? If the future of the firm is human capital and token capital, I want every balance sheet, every income statement in every company to have both. And that's our goal with our frontier model. Our model should be the best model that they can use as a base and keep even the weights, definitely the harness and the context, which is theirs, and they can replace our model with anything else. So that to me is more of a vision that I think is what Microsoft — I always ask the question, why does Microsoft or why does the world need Microsoft? And if we are successful, can the world around us be successful? This, I believe, is a more sustainable way to go at it.
