The Chinese startup DeepSeek shook up the world of AI last week after showing its supercheap R1 model could compete directly with OpenAIâs o1. While it wiped nearly $600 billion off Nvidiaâs market value, Microsoft engineers were quietly working at pace to embrace the partially open- source R1 model and get it ready for Azure customers. It was a decision that came from the very top of Microsoft.
Sources familiar with Microsoftâs DeepSeek R1 deployment tell me that the companyâs senior leadership team and CEO Satya Nadella moved with haste to get engineers to test and deploy R1 on Azure AI Foundry and GitHub over the past 10 days. For a corporation the size of Microsoft, it was an unusually quick turnaround, but there are plenty of signs that Nadella was ready and waiting for this exact moment.
While the open-source model has upended Wall Streetâs idea of how much AI costs, Nadella seemed to know that something like DeepSeek was coming eventually. Appearing on the BG2 podcast in early December, he warned of the exact thing DeepSeek went on to achieve weeks later: an algorithmic breakthrough that results in compute efficiency.
How this breakthrough has been achieved is …
