Satya Nadella Admits China's DeepSeek Was A Wake-Up Call — Tells Microsoft Employees It's Time To Build Real Products - Microsoft (NASDAQ:MSFT), NVIDIA (NASDAQ:NVDA)

After watching China's DeepSeek launch an AI product that topped the App Store with a team of just 200 engineers, Microsoft Corporation MSFT CEO Satya Nadella reportedly urged his teams to match that speed and impact with real-world results.

What Happened: In an internal employee town hall last month, Nadella addressed the tech giant's $80 billion investment in AI this fiscal year — and pointed to China's DeepSeek as a game-changing example of execution done right, reported The Verge.

"What's most impressive about DeepSeek is that it's a great reminder of what 200 people can do when they come together with one thought and one play," Nadella told employees, according to company sources.

"Most importantly, not just leaving it there as a research project or an open source project, but to turn it into a product that was number one in the App Store. That's the new bar to me."

Why It's Important: DeepSeek made headlines earlier this year by optimizing AI performance below Nvidia Corporation's NVDA CUDA layer — improving compute efficiency with a smaller footprint than industry giants. Recognizing its significance, Microsoft quickly deployed DeepSeek's R1 model on Azure in January.

Meanwhile, Microsoft's own Copilot has struggled to achieve mainstream traction. Despite access to OpenAI's latest models, a Super Bowl ad campaign, and major upgrades like voice and vision, Copilot rarely cracks the App Store's top 100.

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Earlier this week, DeepSeek upgraded its V3 model. It now has enhanced reasoning and coding capabilities.

Meanwhile, Microsoft has reportedly been exploring the development of its own high-performance AI platform to reduce its reliance on OpenAI.

Despite the competitive landscape, analysts continue to rank Microsoft among top investment picks, even as the company halts some expansion plans due to potential AI computing overcapacity.

Price Action: Microsoft’s stock edged up 0.16% on Thursday, closing at $390.58, before slipping 0.18% to $389.88 in after-hours trading. So far this year, the stock has declined 6.69%, according to Benzinga Pro data.

Benzinga’s Edge Rankings assign Microsoft (MSFT) a 64.80% growth rating. If you are curious how it stacks up against other companies, click here.

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