MICROSOFT LOST ITS WAY IN THE AI RACE. CAN COPILOT GET IT BACK ON COURSE?

AN EARLY ALLIANCE WITH OPENAI HASN'T BEEN ENOUGH TO KEEP THE SOFTWARE GIANT IN FIRST PLACE. HERE'S HOW SATYA NADELLA AND HIS TEAM ARE REFUELING FOR THE LONG RUN.

- JEREMY KAHN JUDSON ALTHOFF, COMMERCIAL CEO, MICROSOFT

UNEASY PARTNERS Clockwise from top: Microsoft CEO Satya Nadella; OpenAl cofounder and CEO Sam Altman; Mustafa Suleyman, CEO of Microsoft's AI division.

REDMOND, Washington, mid-January 2026.

The weather, cold and gray. It’s the kind of morning the snooze button was built for. But the team of engineers camped out in Building 92 on Microsoft's sprawling campus got here early. They are in a race. And they are behind.

The team is working on a new AI product, one that functions as a personal assistant, capable of doing everything from booking flights to responding to emails to finding a good local plumber. They know competing teams at other companies are working on similar products. As if they needed a reminder that a lot is riding on their work, Satya Nadella drops by. He wants to show them something.

The Microsoft CEO opens a laptop and fires up an application. It’s a kind of system for instructing and controlling multiple AI agents. He calls it “Chain of Debate.” As Nadella walks them through the demo, the engineers trade knowing looks, the sort regulars at the local basketball court exchange when they realize a newbie’s got game. Because Nadella didn’t get someone to build this app for him. He created it himself, vibe coding with an AI tool. “That set the tone for how hard the team was going to push,” recalls Jacob Andreou, the executive vice president responsible for the design of Copilot, Microsoft's AI assistant. "He was in the room with folks, like over their shoulder, there with his machine out."

Watching the boss get such excitement out of building new things inspired the team. It wrapped up its big push in late February when it rolled out Copilot Tasks, the computer-using personal assistant AI tool. (Nadella's own prototype served as the model for a feature called "the model council" as well as other components of Copilot.)