Microsoft boss Satya Nadella reveals Australia’s homegrown edge in the AI arms race
One of the world’s most powerful tech executives says Australia has a chance to seize a slice of the artificial intelligence boom, with new applications and data centres its biggest opportunities.
REDMOND, SEATTLE: Australia can be a credible global force in the artificial intelligence boom by focusing on its strengths in developing applications and operating data centres, Microsoft chief executive Satya Nadella says.
Mr Nadella, one of the world’s most powerful tech executives, said that China’s low cost artificial intelligence model DeepSeek had opened up the AI race, giving countries outside the US a chance to vie for leadership in aspects of AI technology.
“The biggest lesson of DeepSeek is let us not assume that the last big breakthrough in terms of model architecture has happened,” Mr Nadella told The Australian at Microsoft’s headquarters in Seattle.
“We should not take too much for granted that whatever is the current AI regime is the only real regime going forward. Whether it’s in Australia or whether it is in any country – even in the global south – quite frankly, I think [anyone] has a shot at being able to innovate, sometimes on top of existing models or maybe completely a new model architecture.
“And so I am actually more hopeful that the rate of diffusion of this technology is going to create more opportunities for more countries to participate more fully in not just using digital technologies, but creating digital technologies.”
The Microsoft boss would know. He has catapulted the company to the top of the AI arms race, after it reportedly invested $US13bn ($20.49bn) in ChatGPT maker OpenAI. It plans to spend an extra $US80bn on AI this financial year. It is also spending $5bn building nine new data centres in Australia – Microsoft’s biggest investment in the country.
A report by Microsoft and Mandala Partners found Australia could reap about $18.8bn annually in benefits by 2035 as it develops new AI applications and expands its data centres to jump-start flagging productivity.
The report forecast “fast-paced” adoption of AI would also unlock about $115bn in economic value annually by the end of the decade, across various industries from healthcare to financial services. Microsoft counts Commonwealth Bank, Telstra and John Holland among its biggest Australian customers.
“You cannot not be an optimist in this industry, given that you have a valuable resource that is being fundamentally driven in by these S curves, and multiple of them, creating abundance and hope,” Mr Nadella said.
“Having grown up in the global south” – he is from Hyderabad – “I feel every day, ‘wow, is there going to be a general purpose technology that will not, in fact, have this distinction between the global north and global south?’ In other words, it’s going to help a rural Indian farmer and an entrepreneur on the West coast of the US to the same degree.
“I feel like AI, interestingly enough, probably is that. And so that again is what is shaking me and giving me energy.”
Australia’s data centres have attracted capital and attention, with US private equity firm Blackstone acquiring AirTrunk for $24bn in debt and equity last year. That deal prompted billionaire founder Robin Khuda to claim AirTrunk can be a $100bn business.
Greg Boorer, founder of rival data centre operator CDC, joined the ranks of Australia’s wealthiest last month after Commonwealth Superannuation Corporation agreed to sell half its stake – 12.04 per cent – in CDC to the Future Fund and Infratil for just over $2bn. This valued the company at $17bn and Mr Boorer’s personal stake at $622m.
Software companies are also seizing on the AI boom, with visual communications darling Canva’s valuation soaring 23 per cent to $US32bn last year.
Canva has been betting big on AI, acquiring Australia’s home grown model Leonardo.Ai – which like DeepSeek achieved innovation without a Silicon Valley budget – last year for an undisclosed sum.
“One of the things everybody talks about is how compute intensive all AI is today,” Mr Nadella said.
“It’s true today. But tomorrow somebody may come up and say, ‘hey, we figured out some distributed training breakthrough’ or what have you, and suddenly it’s not as compute intensive.
“I think there might be a math breakthrough, which fundamentally up-ends it all.”
At the same time, Australian companies have been among the earliest adopters of generative, or conversation AI, which is the ability to perform a range of tasks via simple verbal prompts.
At its headquarters, Microsoft said one of its Australian customers, Bank of Queensland, was using its AI Copilot tool to run complex risk analysis processes in half the time. Telstra bought 21,000 Copilot licences last year in the biggest deployment of the technology so far in Australia.
Other companies, including ANZ, are using Microsoft’s GitHub Copilot, its AI-powered coding assistant, to write new programs. ANZ chief executive Shayne Elliott revealed in November that the bank’s team of 7000 software engineers had used AI to write more than 7 per cent of the bank’s code for apps and other programs in the past six months – “and that number will only increase”.
Mr Nadella dismissed concerns that AI would eventually fuel unemployment and boredom.
“Let us make sure we separate out knowledge work from the knowledge worker because that even helps us think about employment differently.
“We used to say, ‘oh, there are only, 100 million or 200 million developers’. When I look at the IT backlogs in the world, the world needs maybe one billion software developers. You know pre-PC (personal computer), if somebody had said, ‘Oh, you want to have a billion typists’, you would have said, ‘what, a billion typists?’.
“Guess what? We’re all typists. Economists call it the lump of labour fallacy. I think that’s one thing that we should just remind ourselves, as opposed to not being callous about it and not being clear eyed about any displacement, what does it mean to skill and re-skill, especially mid-career, so you are equipped for jobs of the future.”
In August 2022, Mr Nadella and many of his executives gathered in a meeting room at Redmond for a demo of GPT-4, the powerful AI platform developed by OpenAI, then an untested and largely unknown start-up.
Mr Nadella expects Microsoft’s relationship with OpenAI to last for decades, even as Microsoft ploughs ahead on developing its own generative AI models.
He was crucial in helping restoring Sam Altman as OpenAI’s chief executive after his shock dismissal in late 2023, protecting Microsoft’s $US13bn investment.
“I grew up in a Microsoft which knows how to create long-term, stable partnerships that are win-win. That doesn’t mean that they won’t compete with us. They will, they do today,” Mr Nadella said.
“But we are at the same time thrilled to have them as a big customer of ours, a commercial partner. We are equity investors, a significant one, so Microsoft benefits every day that OpenAI does well.
“Will we have our own model capability? Absolutely. We already have it. We will have more of it. Will we partner with other model builders? Absolutely. We have that today and we will do more of that in the future.”
The author travelled to Seattle as a guest of Microsoft.
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