Microsoft’s Mistral deal beefs up Azure without spurning OpenAI

Microsoft’s multiyear deal with French AI company Mistral signaled that the company wants longevity in the space.

The company invested €2 billion ($2.1 billion) into Mistral and announced it would bring Mistral’s newest AI model, Mistral Large, to Azure. But the investment into Mistral, mainly a developer of open-source AI models, doesn’t mean Microsoft lost faith in its first AI child, OpenAI. Instead, Microsoft is laying the groundwork to build Azure as a model garden and give itself a foothold in Europe.

Arun Chandrasekaran, an analyst at Gartner, tells The Verge the deal emphasizes the managed services business of AI, one in which Azure can play a role.

“Even before the Mistral announcement, Microsoft has been talking about building a model garden, so it is not a surprise that they will also have Mistral’s models,” he says. He adds working with Mistral, which is popular among developers, lets Microsoft tout the breadth of choices Azure offers.

Microsoft is not the only tech company offering its clients other models. Most cloud providers, like AWS and Google, do this through managed services, providing access to the models and other services to make them easier to use. So, to compete, cloud providers try to be the first to offer highly coveted models. Microsoft securing an exclusive deal with Mistral to bring Mistral Large to customers makes Azure an interesting prospect for people building with other Mistral models.

Azure has offered models for a while, but Microsoft became so tightly connected to OpenAI that it’s easy for people to forget the company works more than just GPT. Microsoft, of course, is OpenAI’s biggest investor. It put $10 billion into the company and helped propel it to great heights by throwing its stable of consumer and enterprise products behind GPT.

Nothing in Microsoft’s announcement about Mistral shows the company intends to pit its two kids head to head. OpenAI remains the favorite child because its models power Microsoft’s flagship AI product, Copilot.

“Unlike the OpenAI investment, where they were very public about it, the Mistral deal is a bit more secretive. The investment into OpenAI is still more strategic because they’re not bringing Mistral inside its apps but to train models on Azure,” Chandrasekaran says.

The European factor

However, Microsoft becoming a minority investor in Mistral isn’t just a move to beef up its Azure model garden. It also lets the company become a player in the European AI space by buying into a company that already has a presence in the region.

Mistral, of course, is French. After the European Union’s AI Act passed, French president Emmanuel Macron blasted the new rules, saying it hampered innovation from companies like Mistral. A large portion of the AI Act deals with regulating general purpose AI, into which large language models like Mistral, OpenAI’s GPT, Meta’s Llama 2, and Google’s Gemini all fall. Even though the act is technically not in force yet, it does help if companies begin preparing for a tougher policy regime around AI models. Already, EU regulators are analyzing the deal for potential antitrust issues.

Now that Microsoft has a stake in a European company, it can start making plans ahead of enforcement with a company already entrenched in the region. Microsoft even hinted at what these plans could be like, saying it would bring global expansion opportunities and allow them to “explore collaboration around training purpose-specific models for select customers, including European public sector workloads.”