Microsoft launched a lightweight AI model on Tuesday (23 April) as the tech giant looks to attract smaller enterprises wanting more cost-effective AI solutions.

The company’s new version, Phi-3-mini, is the first of three small AI language models that Microsoft will release. 

Like others in the industry, the tech giant is betting on AI to significantly impact the way people work. 

Research and analysis company GlobalData said GenAI will impact every industry and become a catalyst for broader AI capabilities such as machine learning and computer vision.

Sébastien Bubeck, Microsoft’s vice-president of GenAI research, said: “Phi-3 is not slightly cheaper, it is dramatically cheaper; we are talking about a 10x cost difference compared to the other models out there with similar capabilities.”

Small language models are able to perform more straightforward tasks and are designed to be used by companies for simpler use cases.

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Small language models are well suited for organisations looking to build applications that can run locally on a device rather than the cloud, the company said. Small AI models are best used where a task does not require extensive reasoning or a rapid response.

Phi-3-mini, measuring 3.8 billion parameters, performs better than models twice its size, the company said.

“What we are going to start to see is not a shift from large to small, but a shift from a singular category of models to a portfolio of models where customers get the ability to make a decision on what is the best model for their scenario,” said Sonali Yadav, principal product manager for GenAI at Microsoft.

GlobalData forecasts that the overall AI market will be worth $909bn by 2030, having grown at a compound annual rate (CAGR) of 35% between 2022 and 2030.

In the GenAI space, revenues are expected to grow from $1.8bn in 2022 to $33bn in 2027, a CAGR of 80%.