Microsoft will pay Inflection AI $650m to license its AI software, following the shock announcement on Tuesday (19 March) that it was hiring co-founders Mustafa Suleyman and Karén Simonyan, along with most of the start-up’s staff. 

The unusual deal has left Inflection AI, now with a much smaller workforce, looking to offload some of its computing power, according to a Bloomberg report, citing people familiar with the matter. 

Microsoft said it would pay $620m to license Inflection’s AI models and has dedicated $30m to paying legal rights for mass hiring, according to sources. 

The deal will reportedly make Inflection AI’s investors a return on investment, but it is likely to be less of a return than once thought, according to Bloomberg

Inflection was previously valued at $4bn after raising around $1.3bn in 2023, following interest in its GenAI chatbot Pi. 

Pi was marketed as a kinder and more reliable rival to OpenAI’s popular ChatGPT. However, former co-founder Suleyman said that Inflection had failed to find an efficient business model for the chatbot. 

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Reid Hoffman, a Microsoft board member, said he would be staying at Inflection as a co-founder and director, stating that the deal was a “good day for everyone involved in Inflection”.

Inflection will remain in charge of its proprietary technology. The start-up said in a blog post that its AI models were well-placed to be “the AI platform for businesses around the world”.