WHEN: Today, Tuesday, November 19, 2024
WHERE: CNBC’s “Money Movers”
Following is the unofficial transcript of a CNBC exclusive interview with Microsoft Chairman & CEO Satya Nadella on CNBC’s “Money Movers” (M-F, 11AM-12PM ET) today, Tuesday, November 19. Video will be available on CNBC.com.
All references must be sourced to CNBC.
JON FORTT: Hey, Carl. Yes, a very special guest, Satya Nadella, CEO of Microsoft. Thanks for having CNBC here. Want to get right to these announcements, heavy emphasis, it seems, on how Copilot is working. There’s a lot of, well, noise, chatter, a lot of opinions out there about whether this works or not. Marc Benioff at Salesforce has been taking shots at Microsoft. What’s your goal here in what you’re saying about Copilot and what your customers are getting out of it?
SATYA NADELLA: Yes, first of all, thank you so much, Jon, for being here at Ignite. It’s a pretty exciting day for us. I mean, there are two major parts to what we’re doing. One is Copilot, Copilot Studio and agents. Essentially, this is the next phase of business transformation in digital technology, where you’re really doing A.I.-driven transformation. In fact, the best way I describe it is just imagine what happened in manufact — or just think about what lean did for manufacturing, right, which is really increased value, reduced waste. A.I. is doing that for all knowledge work, whether it’s in customer service, whether it’s in marketing, whether it’s in finance, whether it’s in sales. And this Copilot, Copilot Studio and agents has been transformative. It’s the fastest — I mean, just to put it in perspective, it’s the fastest-selling adopted suite of Microsoft 365 ever in our history. You know, 70-plus percent of the Fortune 500 have deployed it. They’re coming back for more suites, so we are excited about this next phase. The other side of it is also pretty exciting for us, because we are taking everything we have built as the platform underneath Copilots and making it first class, available to developers to build their own agents and their own Copilots. That’s where what we have done with Azure A.I. Foundry, which is the new app server for the A.I. age, or Fabric at the data layer, and, of course, GitHub Copilot, that’s the platform for code force development and then Copilot for being able to do transformation.
FORTT: A lot of investors got excited when you announced the $30 charge on top for A.I. And now I think some have gotten scared that maybe the demand for that isn’t sustainable at that price. What does it take? I know you have got some product announcements today that get into the analytics of how Copilot is working. What do you think it takes to get customers not only to buy this initially, but to buy more of it—
NADELLA: Yes, in fact, I mean, we are seeing it empirically happen, right, which is, at the end of the day, what you said is right, which is, people have to deploy it, use it intensely, and then see the ROI, and then scale it. And that’s what — like, for example, today, UBS has scaled it throughout their enterprise. So is Vodafone. So is BlackRock. So, we already have at-scale deployment of big companies that’s happening and, in fact, 200 plus customers that we’re talking about who are going in throughout. But the thing that we announced today is something called Copilot analytics, right, where you literally can take a high-level KPI. Let’s say you’re a territory manager in sales and you want to say, hey, am I closing deals faster? Like that’s ultimately the ROI. And then what’s the correlation between Copilot usage and that metric? And that’s the kind of things that now business leaders everywhere in the organization, not just the CFO, but put it in the hands of all managers, leaders, so that they can literally, in fact, look at their KPIs, look at the usage, because one of the things is, when you think about lean or any other methodology, this is a change management, right? So it’s not just about, oh, I just used the tool. The way I use the tool changes what I work on, how I work and the workflow. And that’s the process we’re going through.
FORTT: One of the criticisms of Copilots, not just Copilots, A.I. in general, is that it’s pulling data from places in the enterprise where, oops, we really don’t want it to go, maybe salary data, maybe other sensitive data, and it’s giving that in outputs. Now, this might not be a Microsoft-specific issue. Maybe some companies just haven’t organized their data in the right way. But how long does it take to fix that, so that these enterprises can take full advantage of your software without running into big problems?
NADELLA: Yes, I mean, I think, first of all, you can even think of this as just — helps you do that hygiene that — which you should be doing in the first place, right? I mean, that’s sort of fundamental. And also, if you think about it, today, if you think you’re sitting inside an enterprise and people are not extracting that data and putting it into a consumer tool, because that — that train has left the station. So, if anything, it is probably very important for corporations to deploy something like Purview, right? In fact, one of the other products at Microsoft that’s really taken off in this A.I. age is data governance, right? With Purview, people want to know exactly that the permissions are there and that the data is being used only where you want it to be used and provenance is kept. And, essentially, you’re able to manage the total governance with an A.I. application workflow. And that’s why I think it’s important to have both your data, data governance and A.I. deployment go together. And if you don’t do that, consumer applications will get used and you will anyway leak data. And so that’s sort of the challenge I think everyone has to face up to.
FORTT: I think there’s a sense out there that so much of the market, the equity market in general, hinges on the trajectory of A.I., right? If you’re seeing demand at Microsoft for people who want to use A.I. and the software tools that you’re using, then you’re going to keep buying chips from Nvidia. And if you keep buying chips from Nvidia, then Nvidia is going to make a lot of money and its stock price is going to go — et cetera, et cetera. And some of these smaller software companies that are trying to figure out these applications as part of your ecosystem, well, they will get funding and they will do well. How bumpy is this journey going to be? Because, even with the web, we went through this valley of doubt.
NADELLA: Yes, I mean, I think it’s a good one to sort of look at, right, which is there’s a supply side to it and then there’s a demand side to it. And it’s never linear. But the point is, they’re secular. I mean, that’s the thing, right, which is, when you’re building a company, when you’re really in the middle of it, for us, it’s — the core thing is, are we building products that are getting used, that are delivering value, right? I mean, if you saw, I’m not obsessed about exactly is this a linear path, which we know it cannot be a linear path, because the adoption cycles are adoption cycles. The build cycles are no one — the network effects happen. So you have to sort of get out there, build the product first. And so I think we’re in that phase. One thing I’d say, Jon, is that, perhaps having lived through — let’s take even the last big one, the cloud one. What happened in the cloud over 10 years, let’s say, is happening with A.I. in a compressed period, like maybe half the time. I mean, if you think about, let’s say we built two, three gigawatts of cloud capacity over the 15 years. We’re going to add something like that in the next couple of years, right? So that’s the time. And you could even say that’s catchup, because there’s not a single application that’s not going to be an A.I. application. So, a little bit of the supply side you’re seeing here is a real catchup growth, because applications are all changing and being morphed by the new platform.
FORTT: Last year, February was, to me, a big moment, was sitting down with you again. You were rolling out Bing search with A.I. added. The hope was gaining share from Google. Last I checked, Google still got 90 percent, roughly, search share globally. OpenAI is now rolling out its own search capabilities. What went wrong?
NADELLA: Well, nothing went wrong. I mean, like, in the last quarter, one of the fastest growing businesses at Microsoft, aside from our commercial cloud, is actually Bing search. We talked about X stack, you know, strong double-digit growth, which is — which is above market, by the way. So that’s fantastic. And so Bing continues to innovate. Emerson continues to innovate and Copilot. So that ecosystem, the three things that come together for us, has actually become a big business that’s growing. And so—
FORTT: So, is search share the wrong way to look at it?
NADELLA: No, I mean, search share is one. Like, I mean, it’s a game of, let’s call it, 100 basis points, a quarter is great. Like, I mean, it’s all progress. You mentioned ChatGPT. We are thrilled about the success they’re having, their partnership with Apple. Guess what? That’s all incremental for even us, because it’s all running on Azure. And, more importantly, we are giving them the Bing index and powering ChatGPT search using our APIs. So, overall, I’m thrilled about their progress. And it’s a place where inches matter, and I’m good with the progress we’re making.
FORTT: Speaking of OpenAI, last November, I was out here at Ignite, and then, a week later, huge blowup over there. You joined me on CNBC. What a moment that was. And I think there were a lot of questions about how healthy the relationship between Microsoft and OpenAI was going to be going forward. Was Sam Altman going to be back at OpenAI? Was he going to be working for Microsoft? Where is that relationship now? And what was the significance of that moment for the relationship?
NADELLA: Yes, for us, first of all, we are very thrilled about sort of how far this partnership has come, right? I mean, we sponsored OpenAI, whatever, five, seven years ago, when we first sort of started. They were a research lab. And here we are. It’s probably one of the most successful private start-ups out there. And so we are thrilled to be an investor. We’re thrilled to be a partner around I.P. They’re one of our biggest customers now. We also compete in some areas. And so the partnership has all of those dimensions to it. But, all up, we cheer every day for their success because every day they succeed, we succeed along with them.
FORTT: Now going more broad to geopolitics, macro, the world is changing once again. Globalization is under even more pressure once again with an incoming second Trump administration. There’s a report from Bloomberg that the Justice Department is going to push to force Google to sell Chrome. Last week, Elon Musk amended his lawsuit against OpenAI to name Microsoft as well. How much of a wild card are the courts in this transition to big data and A.I.?
NADELLA: Yes, I mean, I think you pulled on a couple of different threads, right? What happens to globalization in a world where, let’s say, the U.S. is a lot more focused on reindustrializing in the United States itself, which I think there’s a clear mandate for that? And so I think the way as a multinational company I’m grounded on is, how do we earn permission, quite frankly, one country at a time to operate, right? You never can take your operation in a country for granted. You have to be able to invest in the country. In our case, now we’re even doing capital investments in data centers, doing skilling, creating jobs so that small businesses, large businesses, public sector are all getting benefits, health outcomes, education outcomes, so one country at a time, one community at a time. Even in the United States, you have to sort of earn that. And so that’s one side of it. The second side of it is on courts and what have you. There are many issues, right, because, after all, this is a new technology, everything from what is copyright to what exactly are the big issues where the courts have to opine. And so, yes, I think that there is a time of great change of technology. I think what matters is for us as a company to be able to stick with our mission, produce the products, earn the permission from communities and countries.
FORTT: For the United States in particular, what’s it going to take? Because, say, four years ago, the U.S. versus China A.I. conversation was way different. It was an assumption that China was going to surge ahead because they got more people, they have got access to data without that little issue of rights, et cetera. What does it take for the U.S. to maintain this momentum with A.I., but do it in a way that’s safe?
NADELLA: Yes, I mean, it’s fascinating to see here we are. To your point, when a few years ago or maybe five years ago, people thought about U.S. maybe will fall behind on A.I., and except here we are pretty much across the stack, whether it’s on the semiconductor side or on the application side, it’s U.S. leading. And so I think the key thing is for us to sort of really observe what led us to lead and then double down on it. And so I think the ingenuity of the entrepreneurs here and the big companies here, the talent pool here, the skilling, that’s why I think it’s the most important. Ultimately, diffusion wins. Whoever is intensely using, going back even to your first question, you just can’t come to conferences like this and admire other people’s A.I. You have got to use A.I., like I used Excel or PowerPoint or Word in the past and sort of just became much more employable in the knowledge economy. We have got to do that at scale. That’s one. The second thing I think we also have to do is build infrastructure, right? I think it’s very clear. If you sort of say it’s tokens, per dollar, per watt, right? That’s the new performance curve. Then you need the energy, as well as the compute factory, so to speak, with all of A.I., and connectivity all have to come together as the new infrastructure that fuel economies. And so we’re really looking forward to the U.S. staying ahead, both on the infrastructure and the innovation.
FORTT: That’s where the rubber meets the road. I look forward to continuing to talk with you about it. Satya Nadella, CEO and chair of Microsoft.
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