Agents no Apps // Microsoft CEO Satya Nadella interview
Every IT interaction will be handled through AI agents // dystopian future
Microsoft CEO Satya Nadella wrote a 10-page memo to the CEO selection committee emphasizing “ambient intelligence” and “ubiquitous computing”, later simplified to “mobile-first, cloud-first”. He stressed a cloud approach for Microsoft focusing on the infrastructure layer and using it as a base for various workloads rather than distinct business segments.
Nadella attributes cultural change at Microsoft to embracing a growth mindset, moving from “know-it-alls” to “learn-it-alls.” This culture of learning, purpose, and mission has been key. He emphasizes consistency in strategy, with mission and culture always at the forefront.
Microsoft’s AI Investment, Nadella explains Microsoft’s long history in AI, their decision to invest in OpenAI, and the importance of natural language processing. He discusses the crucial role of transformers and scaling laws in AI progress. He believes the company’s structural position and its partnership with Open AI gives it a unique advantage in AI.
Nadella views the AI landscape as highly competitive, acknowledging the strengths of Google, Amazon, Meta, and others. He doesn’t see a win-or-take-all scenario but predicts a multi-layered competition across infrastructure, models, and applications. He acknowledges the growing importance of AI app servers. Nadella believes that Open AI has an advantage with escape velocity.
The Future of Search and Consumer AI. Nadella discusses the shift from traditional search to more conversational, stateful “answers”. He highlights the importance of distribution for search. He sees that co-pilot represents a new, agentic interface for work.
AI Agents & Action. The most interesting question is agent to agent communication. Nadella discusses the potential for agents to interact with other apps and data. He mentions the idea of “connectors” for business applications and sees that this is what the future is in enterprise settings. He predicts monetization opportunities will emerge based on this idea. He acknowledges the security risks and the role of the user and OS in controlling app access.
Nadella confirms the significance of memory for AI agents and sees 2025 as the year for more persistent memory for AI. He also discussed the use of memory schemas to structure memory, allowing more structured use by agents.
Enterprise AI. He discusses the growth of Microsoft’s AI business. Inference has grown dramatically for Microsoft, especially with their partner Open AI. He mentions that Microsoft does not do much training compared to their competitors and instead focuses on post training capabilities. He attributes the success to a two year runway.
Microsoft’s Copilot Approach. He addresses concerns about AI integration into existing platforms like Excel and CRM. He believes in collapsing business applications logic into AI agents.
AI and Productivity. Nadella sees AI as a tool for “lean for knowledge work,” increasing efficiency and reducing waste. He provides examples of how Microsoft is using AI to improve customer service, coding, and various workflows. He expects headcount to be more efficient as revenue increases through using AI internally.
Capex and Model Scaling. Nadella acknowledges the increasing capex needs of cloud and AI. Microsoft’s capex has gone up dramatically over the last five years. Nadella believes that software can drive utilization of capital expenditures for GPUs. He believes in model scaling but also in a more disciplined approach that considers economic realities. He also states that they had to outsource a lot of their GPU infrastructure to keep up with demand.
Model Training and Inference. Nadella believes that model scaling will reach a point where there is an economic governor. He stresses the importance of both pre-training and inference time compute and describes the role of test time sampling and autograding.
OpenAI Relationship. Nadella describes the relationship between Microsoft and OpenAI as multi-faceted: investor, IP partner, customer, and co-petitor. He emphasizes their mutual interest in OpenAI’s continued success. Microsoft is committed to using Open AI as a main part of their training strategy.
Open vs Closed Models. Nadella views open source and closed source as different tactics for creating network effects rather than a philosophical debate. He sees both have a role to play and sees a path where multiple companies exist with both open and closed approaches. He believes that AI safety is an orthogonal issue to whether models are open or closed and believes that regulation will be necessary.
Nadella portrays Microsoft as strategically positioned to lead in the AI era, leveraging its unique partnership with OpenAI, its deep understanding of enterprise needs, and its commitment to continuous learning and cultural adaptation. He sees AI as an opportunity for transformative change and growth, both within Microsoft and for its customers. He is optimistic about the future of AI, but also acknowledges the risks of unintended consequences and the importance of a thoughtful, collaborative approach to safe AI development.
