Unnamed sources say that Microsoft is paying approximately $650 million in its deal with Inflection AI. $620 million was paid for non-exclusive licensing fees for Inflection's technology and $30 million was paid to get Inflection to agree not to sue over Microsoft's poaching. Inflection will pivot away from building a personalized AI chatbot to becoming an AI studio that helps other companies work with large language model AI. Microsoft has several reasons for needing a backup for OpenAI - for one, its deal with OpenAI is being scrutinized by the FTC.

High-profile AI startups like Inflection AI, Stability AI, and Anthropic are facing financial pressures as they struggle with the high costs of developing generative AI models. While OpenAI, backed by Microsoft, has shown revenue growth, competitors like Anthropic and Stability AI grapple with substantial gaps between revenue and operating expenses. Microsoft's investment in AI hints at the tech industry's belief in AI's long-term profitability, despite the current challenges in monetizing these expensive technologies.

Inflection AI has unveiled a new leadership led by co-founder Reid Hoffman. Hoffman claims that the startup has 18 months of runway left and that it will double down on building emotional intelligence within AI.