Microsoft CEO Satya Nadella is drawing a clear line between his company’s approach to AI and cloud and that of competitors like Oracle.
In a conversation with Dwarkesh Patel, Nadella laid out why Microsoft isn’t chasing quick wins by selling cheap cloud compute to a few large AI customers.
Oracle is aiming to surpass Microsoft’s compute capacity by 2028 through low-margin hosting deals with major AI firms. Nadella views that approach as shortsighted. Rather than competing on price, Microsoft is focused on building a platform that serves a wide range of customers. By targeting the “long tail,” Nadella believes the company can achieve more sustainable growth and stronger margins over the long run.
As the AI market matures, Nadella expects companies like OpenAI, Anthropic, and Deepmind to become foundational layers for thousands of new products and services. Microsoft’s goal is to power that ecosystem not just with raw compute, but with the infrastructure and tools needed to support the next generation of AI innovation.
Microsoft prepares for pay-per-agent AI era
Nadella sees AI fundamentally reshaping Microsoft’s core business. Office, once known as a suite of end-user tools, is evolving into infrastructure for AI agents, digital assistants capable of handling actual work on behalf of users. This means pricing will eventually shift as well, expanding from per-user billing to include per-agent charges that reflect the rising role of automation in the workplace.
Nadella also stressed that technical performance alone won’t determine the leaders in AI. Trust in a company, its home country, and its institutions will play just as big a role, a message that reflects his awareness of the current political climate.
"Trust in American tech is probably the most important feature. It's not even the model capability, maybe. It is, 'can I trust you, the company, can I trust you, your country, and its institutions to be a long-term supplier?' That may be the thing that wins the world," Nadella said.
Nadella’s comments come at a time of major political shifts. After Donald Trump’s re-election, the EU has been stepping up efforts to rely less on major U.S. tech companies. That growing skepticism in Europe presents a real risk for Microsoft. Still, the EU’s plans for AI independence haven’t gotten far, mostly because the region still lacks the compute to make it happen.
