Roula Khalaf, Editor of the FT, curates her favorite stories in this weekly newsletter, offering insights into the evolving landscape of technology and business.
Microsoft’s Journey Through Technological Shifts
Fifty years ago, Bill Gates and Paul Allen embarked on a journey that would reshape the tech industry by founding Micro-Soft, initially aimed at selling a version of the Basic computer language for the Altair, the first proto-PC. This modest beginning set the stage for a company that would experience dramatic rises and falls, mirroring the cyclical nature of the tech industry itself. At its core, Microsoft has always focused on equipping developers with the necessary tools to create applications and platforms.
Today, Microsoft commands a vast network of data centers across the globe, a far cry from its origins with the Altair. The company has recently enjoyed a resurgence, thanks in part to its strategic investment in generative AI. However, the unpredictable nature of platform shifts in the tech sector raises questions about whether Microsoft can navigate the challenges posed by this latest wave of innovation.
Three decades ago, as Microsoft basked in its PC dominance, it faced a significant threat from the rise of the internet. The potential for developers to create applications that operated within web browsers, as envisioned by internet pioneer Netscape, posed a challenge to Microsoft’s Windows operating system. The emergence of Linux as a viable alternative further complicated matters, leading to a critical juncture for the company.
Ultimately, Microsoft managed to suppress Netscape, but it wasn’t the internet that diminished its supremacy; rather, the advent of smartphones shifted the focus away from PCs, ushering in a new era of mobile app development. The rise of cloud computing further eroded the relevance of traditional PCs and servers, resulting in a prolonged stagnation of Microsoft’s stock price.
Satya Nadella, who took the helm as CEO in 2014, has been instrumental in steering Microsoft away from its PC-centric model. By embracing a cloud-first strategy and offering developers a diverse array of tools—including open-source software, which his predecessor Steve Ballmer had once dismissed—Nadella has revitalized the company’s approach. His partnership with OpenAI, established in 2019, allowed Microsoft exclusive access to the startup’s AI models via its cloud platform.
Under Nadella’s leadership, adaptability has become a hallmark of Microsoft’s strategy, particularly as the generative AI market undergoes significant transformations. Despite its close ties with OpenAI, Nadella has recognized the potential for commoditization of advanced AI technologies. Microsoft was quick to support Meta’s open model, Llama, and began offering access to DeepSeek’s R1 reasoning system shortly after its launch.
However, the full impact of generative AI on the tech landscape remains uncertain. As with previous transitions in Big Tech, this shift could pave the way for new competitors and fundamentally alter how Microsoft’s customers develop and deploy applications. Nvidia, for instance, has leveraged its Cuda software to dominate the AI chip market, and as competition intensifies, it is expanding its software services to enhance its offerings.
OpenAI’s ambitions also present a formidable challenge for Microsoft. While ChatGPT has emerged as a consumer tech phenomenon, OpenAI’s ultimate goal is to establish a central platform for the AI era. Should OpenAI achieve its vision of creating superintelligent AI, it could disrupt existing strategies across the industry. Even if that level of intelligence remains elusive, a growing reliance on advanced AI for application development could position large language models as the new foundational platform for developers, reminiscent of the early internet browser’s transformative impact.
Yet, it is also possible that generative AI will remain an extension of the existing cloud era, playing to Microsoft’s strengths. Since Nadella’s appointment, Microsoft’s stock price has surged tenfold, elevating its market value to nearly .8 trillion. As the company reflects on its first fifty years, there is much to celebrate amidst the ongoing evolution of technology.
