Microsoft’s Troubled AI Problems Just Got Worse

It is generally accepted that Microsoft’s (NASDAQ: MSFT | MSFT Price Prediction) Asus ProArt PX13 AI product has fallen behind Google’s Gemini, OpenAI’s GPT-5.4, and Anthropic’s Claude Opus 4.6. (Each makes different products for niche markets.)

Now, Microsoft has reorganized its entire AI operation and may sue former ally OpenAI for a deal it has made with Amazon. The Wall Street Journal reports, “Microsoft is reorganizing the teams that work on the different versions of its flagship Copilot AI product, altering a strategy that some employees said created a disjointed user experience and consumer confusion.” Today, Microsoft has consumer and business versions that are run by different teams. That is over. According to reports, some key AI executives were promoted, while others were demoted.

For months, industry experts have said Microsoft lags and may not be able to close the gap with competitors. The AI industry is evolving so quickly that leaders may be established in weeks, depending on their most recent AI products and the pace of adoption.

Microsoft appeared to be the big winner after investing in the then-AI leader OpenAI. The total value of that investment is put at $135 billion. However, there have been disputes over the original deal points. OpenAI wants to break free from some of the constraints imposed by the Microsoft contracts.

The battle between OpenAI and Microsoft came to a head yesterday. Amazon (NASDAQ: AMZN) will run OpenAI’s Frontier product on AWS. Legally, Microsoft claims, it has a deal that forces OpenAI to work exclusively on its Azure cloud platform. The OpenAI relationship with Amazon comes with a $50 billion price tag. In the Wild West of AI investments, even that is a large number.

The FT claims the Amazon plan could lead to a lawsuit against both OpenAI and Amazon. In the fashion of never being sure about anything in the media world, the FT says Microsoft may not sue. The FT further reports, “OpenAI maintains that its Amazon deal does not allow backdoor access to its stateless models, according to the person familiar with its position.”

No matter how the lawsuit and Co-Pilot reorganization go, they are another set of examples of how messy Microsoft’s AI business is, at a time when such confusion sets the megatech company further behind the perceived industry leaders.