Microsoft engineers are making preparations for its Azure cloud service to potentially accommodate Grok, the artificial intelligence model developed by Elon Musk’s xAI, The Verge reported on May 1st, citing a source familiar with the plans.
Discussions between the two companies are exploring making Grok available through Azure AI Foundry, Microsoft’s platform designed to give developers access to AI services and pre-built models. This initiative appears driven by Microsoft CEO Satya Nadella’s ambition for Azure to serve as the primary hosting provider for prominent AI models, even those competing with its primary partner, OpenAI.
Grok 3: Capabilities and Development
The model under consideration, Grok 3, was introduced by xAI in February 2025, accompanied by internal benchmark data suggesting superior performance compared to rivals like OpenAI’s GPT-4o and Google’s Gemini 2.0 in specific math, science, and coding evaluations, though OpenAI disputed some comparisons with its own unreleased models at the time.
Grok 3 operates on xAI’s dedicated Colossus supercomputer infrastructure. It features capabilities such as a “Think” button, designed to facilitate more elaborate reasoning processes often referred to as chain-of-thought, and a “Deep Search” function aimed at synthesizing current information.
Independent assessments from February, including tests by Andrej Karpathy, indicated variable performance: proficiency in certain reasoning tasks but also noted inaccuracies in Deep Search outputs, like generating “hallucinated URLs,” alongside limitations in creative response generation and spatial logic tasks. Since its launch, xAI has continued to iterate, rolling out a “Memory” feature in April allowing conversational recall and launching “Grok Studio,” a collaborative editing environment, the same month.
An Unfiltered AI with a Controversial Past
Integrating Grok could present unique considerations for Microsoft, stemming from the AI’s unconventional design and track record. Musk has positioned Grok as an AI less constrained by typical content moderation.
This philosophy manifested in a February voice mode update featuring personalities (“Unhinged,” “Sexy,” “Conspiracy”) capable of profanity, extended simulated screaming, user insults, and suggestive dialogue, sparking debate about AI safety protocols.
In the same timeframe, Grok generated controversial outputs, including one suggesting Musk and Donald Trump “deserve the death penalty,” an incident xAI engineer Igor Babuschkin later described as “really terrible and bad failure.”
Subsequently, it was revealed that Grok had been temporarily filtering search results concerning misinformation involving Musk and Trump. Babuschkin confirmed an employee had inserted the directive “explicitly instructed not to mention Donald Trump or Elon Musk” into the system prompt without authorization, and it was subsequently removed.
Currently, Grok’s access is tightly controlled. The full Grok 3 model became exclusive to the X Premium+ subscription tier in February, a move accompanied by a doubling of the tier’s price to $40 per month.
While Grok functionality was extended to Telegram Premium users in March, this access provides only basic capabilities; advanced features remain gated behind the higher-cost X subscription or the standalone Grok application.
xAI further commercialized the model by launching a public API for Grok 3 and Grok 3 Mini in April. However, according to xAI’s documentation, this API access comes with technical constraints, including a 131,072-token context window – the amount of information the model can process simultaneously, which was noted by some observers as less than previously suggested figures – and training data limited to information available before November 17, 2024, precluding real-time web knowledge via the API.
Strategic Moves: xAI’s Structure and Microsoft’s Platform Play
The potential partner for Microsoft is XAI Holdings Corp., the entity resulting from the merger of xAI and X in late March/early April. This transaction, valuing xAI at $80 billion and X at $33 billion (including debt), aimed to combine xAI’s technology with X’s vast user base and data pool.
Currently, XAI Holdings is reportedly seeking around $20 billion in new investment at a valuation potentially exceeding $120 billion, partly to address X’s substantial debt. The company also faces external challenges, including an ongoing trademark dispute over the “Grok” name with startup Bizly, whose prior registration has led to the suspension of xAI’s application by the USPTO.
For Microsoft, incorporating Grok into Azure AI Foundry represents a continuation of its strategy to diversify the AI models available on its cloud platform. Azure AI teams have demonstrated agility in onboarding models from OpenAI’s competitors, such as the rapid deployment of DeepSeek’s R1 model earlier this year, reportedly at Satya Nadella’s urging.
In an April interview with The Verge, Asha Sharma, Microsoft’s CVP of the AI platform, articulated this vision: “For Azure AI Foundry we’re thinking about how we evolve to become the operating system on the backend of every single agent.”
This approach is already visible in Microsoft’s GitHub Copilot, which supports models from Anthropic and Google in addition to OpenAI, suggesting a potential multi-model future for its core Copilot offerings as well.
The potential Grok deal is understood to involve providing hosting capacity for running the Grok model, rather than the extensive server infrastructure needed for training future iterations. Musk has publicly stated xAI’s intention to train models “internally”, following reports of a canceled server deal with Oracle in 2024. Details on whether any Azure hosting arrangement would be exclusive have not been clarified.
Partnership Dynamics and Potential Timing
Adding Grok to Azure’s portfolio could introduce new complexities to Microsoft’s strategic relationships. Musk’s involvement in the controversial Department of Government Efficiency (DOGE) project, though he has indicated plans to step back this month, might be a point of internal discussion.
More significantly, a partnership with xAI could exacerbate existing strains in Microsoft’s relationship with OpenAI. The two companies have reportedly experienced friction over resource allocation and model access. SoftBank recently finalized a $40 billion investment in OpenAI, making it the startup’s largest backer and overtaking Microsoft in influence.
While Microsoft has been OpenAI’s primary investor and infrastructure provider, this new funding signals OpenAI’s increasing independence. OpenAI also secured a five-year, $11.9 billion agreement to access CoreWeave’s GPU-powered cloud services, in a step to diversify its computing power beyond reliance on Microsoft Azure.
Compounding this, Musk and OpenAI are embroiled in public disagreements and legal actions, including OpenAI countersuing Musk in April. Apparent delays and capacity issues surrounding OpenAI’s next major model update, GPT-5, could further motivate Microsoft to secure alternative high-profile AI models for its platform.
An official announcement regarding Grok’s potential availability on Azure might coincide with Microsoft’s Build developer conference, which is scheduled to commence on May 19th.
