Microsoft’s Strategic Maneuver: A Covert €15 Million Investment in Paris-based Mistral AI

Microsoft has made a significant investment in Mistral AI, a Paris-based startup that is quickly emerging as a strong contender in the AI landscape with its new large language model, Mistral Large. Currently in beta, Le Chat represents Mistral AI’s venture into creating user-friendly AI applications that directly engage with end-users. This service, accessible at chat.mistral.ai, allows users to experience the capabilities of Mistral AI’s models, including Mistral Small, Mistral Large, and the succinctly designed Mistral Next, free of charge for the time being. This model is poised to rival OpenAI’s GPT-4 and other leading AI technologies.

With pricing set at $8 per million input tokens and $24 per million output tokens, Mistral Large not only offers competitive rates compared to GPT-4 Turbo but also supports multiple languages including English, French, Spanish, German, and Italian. This pricing strategy, along with comprehensive language support and a generous context window, positions Mistral Large as an attractive option for developers and businesses seeking advanced AI capabilities at a lower cost.

The investment by Microsot, amounting to €15 million ($16.3 million), marks a pivotal moment for Mistral AI as it seeks to expand its footprint in the competitive field of artificial intelligence. The partnership between Microsoft and Mistral AI extends beyond financial investment. It encompasses a strategic distribution collaboration that integrates Mistral’s cutting-edge models into Microsoft’s Azure platform. This move not only broadens the reach of Mistral AI’s technologies but also enriches Azure’s catalog of AI models, offering customers a broader spectrum of AI tools within the Microsoft ecosystem.

This investment is particularly noteworthy because it does not alter Mistral AI’s valuation immediately. Instead, it is structured to convert into equity during Mistral AI’s forthcoming funding round, the valuation of which will determine Microsoft’s stake in the startup. Given Mistral AI’s last reported valuation of approximately $2 billion, Microsoft’s investment suggests a less than 1% equity stake, contingent on the startup maintaining its valuation.

Mistral AI’s journey from its inception, through a substantial $112 million seed round, to its latest funding round in December 2023, where it raised €385 million (about $415 million) led by Andreessen Horowitz (a16z), highlights its rapid ascent and the growing investor confidence in its technology and vision. The introduction of Mistral Large, a proprietary large language model accessible via Mistral’s API platform, represents a significant shift from the company’s previous open-source approach, signaling its intent to closely guard its technological advancements and intellectual property.

This development is not just a win for Mistral AI but also for Microsoft, as it diversifies its investment in AI technologies, already holding stakes in OpenAI. However, this strategic investment might draw regulatory scrutiny, especially from EU and UK authorities, given the increasing concerns over competition and monopoly in the tech industry. Microsoft’s decision to keep the investment announcement low-key could be a tactical move to navigate the complex regulatory landscape.

Mistral AI’s strategic decisions — from launching Mistral Large and Le Chat to partnering with Microsoft — reflect a calculated endeavor to carve out a significant presence in the global AI market. These moves not only challenge the status quo set by established players but also demonstrate Mistral AI’s commitment to providing versatile, accessible, and competitively priced AI solutions. As Mistral AI continues to evolve and expand its offerings, its trajectory suggests a keen eye for innovation, strategic partnerships, and a willingness to adapt to the dynamic demands of the AI industry.

This collaboration between Microsoft and Mistral AI underscores the dynamic nature of the AI industry, where alliances and investments are pivotal in shaping the future of technology. As Mistral AI continues to develop and deploy its advanced AI models, its partnership with Microsoft could prove to be a critical factor in its quest to become a dominant force in the global AI market.