Microsoft Chief Executive Satya Nadella has urged businesses to carefully consider how they use proprietary artificial intelligence (AI) models, arguing that companies may be giving away valuable knowledge as they adopt the technology.
In a blog post published on July 12, Nadella said organisations effectively "pay twice" when using AI services. Beyond paying for access to AI models, he argued, businesses also provide proprietary information that helps improve those systems.
"You essentially pay for intelligence twice, once with money, and again with something even more valuable: the proprietary knowledge you must reveal to make that intelligence useful," Nadella wrote.
According to Nadella, AI models learn not only from user prompts but also from the tools people use and the corrections they make when the systems produce inaccurate responses. He argued that these interactions can capture valuable institutional knowledge that competitors would otherwise struggle to obtain.
Venture capital investors and technology executives like Jason Calacanis and Palantir CEO Alex Karp have previously raised similar concerns, warning that AI developers could potentially benefit from insights gained through customer interactions.
Nadella also questioned restrictions on AI model distillation, a technique that uses a model's outputs to train another model. He argued that if AI companies can train their models using publicly available information, enterprises should also have greater flexibility to study and build upon existing AI systems.
The Microsoft chief executive called on organisations to retain ownership of their data, including prompts and user feedback, by creating proprietary AI environments. He also recommended adopting orchestration layers that allow businesses to switch between AI models from different providers instead of relying on a single platform.
Although Nadella did not explicitly advocate open-source AI models, his remarks come as some enterprises increasingly deploy open-source systems on their own infrastructure rather than relying solely on proprietary cloud-based services.
Microsoft has invested heavily in AI companies including OpenAI and Anthropic.
