Microsoft’s agreement to pay Inflection AI $650 million, primarily for licensing its AI software, alongside hiring a significant portion of the startup’s staff, has drawn attention to potential antitrust concerns. The move, resembling an “acqui-hire” without an acquisition, has legal and industry experts questioning its implications amidst increased scrutiny of Big Tech’s AI investments.

On Tuesday, Microsoft surprised the AI community by revealing its recruitment of Inflection’s co-founders, Mustafa Suleyman and Karen Simonyan, as well as a majority of the startup’s 70-person workforce. Initially reported by Bloomberg News, this uncommon arrangement bore similarities to an “acqui-hire” but lacked an actual acquisition. Legal and industry analysts have raised the possibility that Microsoft’s engagement with Inflection could trigger antitrust inquiries from US regulators, who are intensifying their examination of Big Tech’s AI ventures and collaborations.

The agreement will ensure that Inflection’s investors recoup their initial investment, albeit with a modest profit margin. However, substantial returns are not anticipated in the immediate future for these investors. Despite initial high expectations, fueled by a valuation of US$4 billion following a US$1.3 billion fundraising last year, Inflection’s trajectory has not translated into significant gains. Despite the surge in investor interest in chatbots, exemplified by the debut of their bot named Pi, touted as a superior personal assistant, Inflection has struggled to identify a sustainable business model, as revealed by Suleyman in recent statements.

Following the staff transition, Inflection aims to offload compute capacity, seeking a refund from cloud computing partner CoreWeave to reduce costs. Microsoft‘s payment includes $620 million for AI model licensing and $30 million for waiving legal rights tied to mass hiring. Investors, initially anticipating substantial returns from Inflection’s promising AI ventures, are now expected to see modest gains as the startup shifts focus due to ineffective business models, exemplified by the underwhelming performance of its chatbot, Pi.

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