Microsoft might put China’s DeepSeek inside Copilot to tame its AI bills

The business move

Microsoft is exploring integrating DeepSeek V4, a Chinese AI model, or a similar open-source solution into its enterprise Copilot, specifically to power Copilot Cowork in the Microsoft 365 suite. The company told Axios it is considering running a self-hosted, fine-tuned version of DeepSeek to reduce its AI operational costs. This move targets the expensive cloud compute bills Microsoft faces while scaling Copilot features for enterprise users.

Why it matters

Copilot Cowork aims to be an agentic assistant that supports collaboration, but powering it with third-party AI models domestically or from the open-source community can sharply reduce Microsoft’s reliance on costly large cloud AI models. This can lower the unit economics of running AI-enhanced productivity tools across millions of business users. For enterprises, this may translate into steadier pricing and potentially faster feature updates as Microsoft gains more control over the AI stack. For Microsoft, controlling AI cost is crucial amid rising cloud compute expenses and competition to deliver integrated AI experiences in productivity software.

Who gains and who gets squeezed

Large enterprises using Microsoft 365 may benefit from AI assistant improvements with less impact on subscription prices. Microsoft gains tighter control over AI cost and model customization, potentially improving performance. Cloud providers running Microsoft’s AI infrastructure could see pressure as Microsoft shifts part of the workload to its own hosted models. Open-source AI projects like DeepSeek could gain traction and credibility through high-profile integration. Competitors relying on third-party AI providers or with less flexible infrastructure may face higher cost challenges and slower rollout of AI features.

What to watch next

Monitor whether Microsoft fully adopts DeepSeek or similar open-source models into Copilot Cowork and if it announces AI cost savings or pricing changes tied to this switch. Watch how this affects Microsoft’s AI infrastructure partnerships, especially with major cloud vendors. Investor and enterprise customer reactions could signal expectations on AI cost management and product roadmap speed. Finally, track DeepSeek’s development trajectory and adoption beyond Microsoft as a case study of non-Western AI models influencing global enterprise software.

AI Quick Briefs Editorial Desk