Microsoft’s CEO on How AI Will Remake Every Company, Including His

Satya Nadella arrived at the World Economic Forum in January ready to talk up his triumphs in artificial intelligence, when a dangerous threat emerged. A little-known Chinese startup named DeepSeek had just released an AI model that quickly became the talk of Davos, Switzerland. Nadella, the chief executive officer of Microsoft Corp., gathered his lieutenants to assess the out-of-nowhere competition. They set up a virtual war room on—where else?—Microsoft Teams to coordinate a response.

The new model, DeepSeek-R1, could deliver results roughly on par with those of OpenAI at a fraction of the price. Computer processing that would cost $1,000 through OpenAI ran for just $36 through R1. Even crazier, DeepSeek made R1 open-source, meaning anyone could install versions of it for free if they had a powerful enough computer. “OpenAI has been so far ahead that no one’s really come close,” Nadella tells Bloomberg Businessweek. “DeepSeek, and R1 in particular, was the first model I’ve seen post some points.”