Something strange happened this year. Microsoft is actually starting to listen.
Years later Xbox Series X|S is ignored and lacks updates, Microsoft has begun releasing many new Xbox features in an almost rapid-fire fashion. After several years of Xbox community building losing priority, it has reopened Xbox FanFest this year and even makes the event global.
The big turnaround started this year… But what has changed?
At the beginning of the year, Microsoft CEO Satya Nadella wrote a blog post about the state of technologywith some fairly candid views on the company as well as the trajectory artificial intelligence. The blog post ended with the term “Microslop” as users rejected Nadella’s vision of a world in which artificial intelligence is embraced rather than rejected by the people it is meant to replace.
Microsoft has been at the forefront of the AI debate, but not necessarily as an innovator. Microsoft was the first investor OpenAIGPT has put over $13 billion into the company in exchange for an incredibly lucrative exclusivity deal on paper for frontier AI models. Fast forward to 2026 and now it is Rumors that Microsoft plans to sue OpenAI over its partnership with Amazon, SoftBank and othersit looks like the couple is headed for an incredibly messy divorce.
AI is here to stay, no matter what you or I say. The genie is out of the bottle, and whether what we describe as “AI” today is nothing more than a purer Google Search or an autocomplete tool on steroids, it’s being used in workflows in nearly every industry — military, government, finance, law and beyond, and everything. Let’s ignore the rampant hypocrisy, errors, and hallucinations for a moment.
The biggest challenge for Microsoft is whether it can turn AI into a profitable business. They are so inefficient and unprofitable for today’s models (especially OpenAI models) that it has poisoned them. whole Azure cloud operation. That’s a big deal considering Azure is Microsoft’s biggest cash cow.
Microsoft has lost billions in market capitalization over the past six months as Wall Street grows increasingly nervous about the viability of its AI and cloud businesses.
For Microsoft, the “AI business” revolves around Azure and infrastructure, not products, though services GitHub Copilot is extremely popular too. ChatGPT has hundreds of millions of users, and these users are hurting Azure’s profitability. AI workloads consume GPU clusters faster than previous generations of high-margin, traditional cloud workloads and require unprecedented amounts of electricity, water and other materials to maintain.
Given all the hardware and capability limitations at the moment, investors are increasingly concerned about the near to mid-term future of the technology, which is expecting some major breakthroughs. Bloomberg informed About “half” of planned US data centers are expected to be decommissioned by 2026.
I’ve talked about a lot here, but the OpenAI deal with Microsoft is incredibly complex and fraught with risk. OpenAI and its various partners pay each other with debt and temporary commitments that may never materialize in reality, and the financing of the entire operation increasingly looks like a giant, server-shaped house of cards.
On its current trajectory, OpenAI is not expected to turn a profit until 2030 Competition from Early and Anthropic and possibly cheaper Chinese alternatives makes this proposition look increasingly risky.
JUST IN: About half of US data centers planned for 2026 are expected to be delayed or canceled.April 8, 2026
The sheer scale of OpenAI and its importance (real or perceived) to US national security is also a big issue here. OpenAI’s deal with Amazon for additional computing could represent a breach of contract for Microsoft and its IP rights to GPT and other OpenAI models… Will the US government side with OpenAI in any further court battles?
Basically, what I’m saying here in a nutshell is that Microsoft could end up with a big, puss bag as a result of its “partnership” with an untrustworthy financier. Sam Altman and its profit-allergic OpenAI operation. It’s a risk that could again pay off as Amazon grows its digital business. Amazon is currently the global default in various markets. Microsoft’s current capital spending is betting on the same for AI as a category.
Either way, I think Microsoft is well-positioned for a forward-looking, more realistic, less hype-driven AI industry. But I couldn’t help feeling it in my bones Microsoft knows it has a goof with OpenAI, perhaps architecturally, but also just strategically. there is There are many reports that OpenAI CEO Sam Altman is unreliable at bestand even potentially “sociopathic” at worst.
Leaving OpenAI would be a short-term disaster for Microsoft, spending billions in capital expenditures and building AI infrastructure — infrastructure designed specifically for ChatGPT and other OpenAI models. I highly doubt that Azure’s GPUs will ever be in a state where they are idle; computing demand is well and truly outstripping supply. But considering all the stakeholders … it’s sure to be a mess.
In a post-Partnership world, Microsoft might realize that it needs to rethink it and retain its more reliable core elements.
OpenAI holds the bag in Microsoft’s hands. And if all else fails … well, you’ll need some sort of Windows and Xbox.
CEO of Microsoft Satya Nadella In the context of AI, he talked about the new year blog “public permission”.
I can’t help but say that Microsoft’s broader public image was on Satya Nadella’s mind when he wrote this. Everywhere you look on the internet, you get the feeling that people are well and truly hating on Microsoft. For truly epic Surface innovations, massive investments in Xbox, and even a short leap between Windows Phone before that, iI felt that Microsoft wanted to be seen as consumer first. Even cool
In 2026, Microsoft is at the height of uncool.
In 2026, Microsoft is at the height of uncool.
Xbox has spent the last few years running at full speed, ignoring its customers and community Xbox marketing campaigns that literally tell people not to buy their productsXbox Series X|S consoles are out of stock and cannot be purchased in many cases. After investing billions in the form of studios for Xbox content, Microsoft also decided that the Xbox did not need any unique selling points and began to put games on the PlayStation, which had a larger audience than the Xbox itself.
Windows 11 saw similar stagnation. Absolutely PR disaster with privacy-destroying Windows Recall dramacomplete Copilot+ PC brand failure and presentation and the death of Surface innovation … Windows itself generated unprecedented interest in rival platforms, e.g Linux, SteamOSand potentially even the existing Android PC project from Google.
No one with a brain at least denies this AI some form It’s not critical to Microsoft’s long-term future in tech, but it’s come at a huge cost over the past few years. Both literally and figuratively.
The public hates AI for destroying the Internet, consumer electronics prices, and jobs. Microsoft is the corporate face of AI, with its design and neglect of its core services and products. ordinary people pay is the value. The damage to Microsoft’s reputation over the past few years is unlike anything I’ve personally experienced in my 13 years covering Microsoft. Minor updates to Windows and Xbox will take more than a few weeks to fix this.
In any case, it seems clear to me that something very specific changed within Microsoft this year. I can’t help but smell a little rush And you can’t spell it without it AI.
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