Microsoft (NASDAQ:MSFT) shares rose 3% on Thursday after reports indicated the company plans to introduce a set of internally developed AI models at its Build developer conference in San Francisco.
According to the report, the new lineup will include a coding model intended to strengthen GitHub Copilot's competitiveness with rivals such as Cursor and Claude Code. In addition to the coding model, Microsoft is expected to unveil models focused on reasoning, speech, transcription, and image generation.
The move comes as Microsoft continues to rely heavily on external providers for AI capabilities. The company currently uses models from OpenAI - provided at no cost under an agreement that runs through 2032 - as well as models from Anthropic to power parts of its software. The reported strategy aims to build in-house alternatives that can match or approach the capabilities of those external models while offering lower operational costs.
Internal sources cited in the report note that Microsoft’s internal AI group, led by AI chief Mustafa Suleyman, had faced limits on training top-tier models because of terms in the OpenAI agreement. Those restrictions were renegotiated in April, the report said, clearing the way for development of the new models.
Microsoft plans to position the internally built models as more economical options compared with slightly more capable models from OpenAI and Anthropic. The company expects that using its own models could reduce the expense of running AI-powered features, including those integrated into its Office applications.
Executives and engineers at Microsoft are reportedly preparing to present the new models to developers next week at Build. The product lineup is framed as part of a broader effort to decrease dependence on external AI suppliers once preferential arrangements with those suppliers expire.
Context and implications
The reported initiative represents a push by Microsoft to internalize AI capabilities and manage future costs linked to AI services embedded across its software portfolio. Details published ahead of Build indicate the company will emphasize cost efficiency and competitive parity with third-party providers.