Microsoft CEO Satya Nadella: AI Boom, Energy Battle & His Complicated Alliance with Sam Altman

You know, if I said, you have to, have you figured out, because in an interesting way, the mental model you should have, and Andrej Karpathy recently talked about it, right? Which is, which I think is the right metaphor. If you really want to create crack intelligence, you need to throw away all the data. Essentially, you can't regurgitate, right? You have to throw away all of your training data and just have learned the algorithm for learning, right? I mean, think about it, right? A baby is born, a baby experiences the world and learns by experience. So it's not, so we kind of have this quasi machine today that sort of can regurgitate sometimes, but at the same time in that regurgitation, it also does have pattern recognition, which is very powerful.

So it does have some, I'll call it emerging cognitive core that's mixed up with this knowledge it has. So in other words, if you can separate out the knowledge of the model from its cognitive core, like that I think is the next big scientific breakthrough. And by the way, if you do that, it'll be a lot more energy efficient. After all, this brain, you know, what is it? 10 watts, what have you. So therefore, I think we need even a little more science to help us understand what does it mean to have a cognitive core learning algorithm? Satya, you have said it many times in public and also in your shareholder letter, you spoke again about the transformation of Microsoft.

It is basically a reinvention of the company and it is at the same time, it needs to be also a reinvention of yourself. So what would you say is the toughest part in that, both for Microsoft and for yourself? Yeah, no, I think for all of us, I mean, it's sort of such an important thing, right? Which is, to me, there are two things which I would say. The original premise that Bill had when he started Microsoft was, which I think has really been very helpful framing for all the success we've had in the last 50 years, was he said, look, there's a software revolution about to happen. And guess what? He said it when there was no software industry, right? In 1975, there was no such thing. There was systems company. There was IBM, there was DAC or whatever. There was no idea. The PC didn't exist. The microcomputer revolution did not happen. And more importantly, it was not even clear that there would be an industry called the software industry.

So at that time, he said, you know what? Software is the most malleable resource. Let's become a software factory. It was not about, oh, we'll build an operating system or we'll build a languages tool or we'll build an office productivity because they all came subsequently. right? Microsoft's path, quite frankly, has been a meandering path, right? Most people don't remember. We built Office for the Mac first and Windows came later. Our first tool was on basic interpreter. We built flight simulator before Windows. So we were mostly a software factory and we said, hey, we'll build whatever the world needs. And so that was the attitude that has really helped or the metaphor that helped us through 50 years. Because quite frankly, even though technology changed rapidly. After all, we started, you know, on even pre-PC and then scaled all the way to the cloud. But the fundamental game was all.

always about, oh, you're a great software factory. But now we have to kind of help you at Axel Springer build your own software factory. So it's sort of an interesting way. It's become a different game where whatever we do, we need to make every company and, you know, create their own AI slash software factory. And so that's the paradigm shift, which, by the way, is a pretty big paradigm shift. And that's what we're in the midst of. And so that's where you got to go back to your core mission, Matthias, which is what do we stand for? What is our brand around trust and empowerment and reinforce it with a culture of learning new things, right? So I always go back to a sense of purpose and mission and culture reinterpreted for what is a new world of technological shift and business model shift.

But in that process, Satya, did you yourself also need to change a little bit your skill set? What did you develop that you didn't have before? Or would you say with exactly the same skills you were and are able to manage that transformation? It's a great one, right? One of the metaphors we use a lot coming out of this child psychology and Carol Dweck's work of growth mindset is when you say skill set, I think the most important skill set for long-term relevance is, you know, how do you be a learn-it-all and not a know-it-all, right? That, I think, is the core. And especially when you have had success, it becomes even harder.

Because the reason why it becomes even harder is you have to unlearn the things that made you successful to learn something new, right? I mean, if you think about it, right, even today, as I sit around this entire weekend, I spent all the time trying to get myself to understand how, you know, new companies are building products which are different than, say, how we have built our products. After all, our scale is a massive advantage, but it's also a massive disadvantage. Let's face it, right, which is it's a massive disadvantage because in order for me to round trip between product, science and infrastructure, I have three divisional heads who manage those three things versus in a startup, they will be all sitting in one little table, all coordinating across the three.

And so to relearn what it means to create the magic of production in the new world, that I think is where I would say you have to do that. And in order to do that, you have to have a mindset that's curious, that's capable of hitting the books, doesn't kind of have the ego get in the way. And that's a hard thing. So if it is about basically shaping the whole ecosystem and helping companies to be successful, which companies will survive or will benefit from the AI transformation? What's the skill set for leaders in other companies and for the companies as such?

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particularly Germany, where there is a problem. We dropped out of nuclear energy. And I think that is setting limits for your expansion plans to Europe, in particular, to Germany, correct?

Yeah, in fact, it's a good one. I'm not deep in exactly what our issues obviously are in DC. You know, we are building in Germany, we will need energy in Germany. And it's something that we will rely obviously on German policy and German ability to create energy. Because at the end of the day, that is going to be, I think any country will have to sort of measure itself on how can they be great producers or tokens per dollar per watt. The good news is we are happy to invest capital, right? So in some sense, you know, us and others will come build the data center so that the German economy can benefit from this. But the problem is you need the tokens per dollar per watt needs to be competitive because pricing will be local ultimately. And so even German companies, if they don't get the best pricing, they'll just go to Netherlands or wherever the prices are there.

Should Germany go back to nuke the energy? I'm assuming as much of a political question as it is a technological question. And so I would let the German people decide as opposed to sort of me. But I would say, I think having energy capability, right? When I look at the United States, right, what is the current administration? And I think rightfully so, they have focused a lot on making sure that there is real energy coming online in order to make sure that, in fact, it is not. Like, there are two things that they're concerned about. They don't want to increase prices on... citizens of the United States, because there needs to be a new build for AI. That's one side of it. And then the second side of it is how do we build more energy for, you know, being a leading provider in the AI age? And I think that's what every country needs to do. The next years will be decisive. So if Germany does not return to nuclear energy and new technologies are not at hand, they will solve the problem immediately. The likelihood that we are going to miss out on And AI and value creation in that context is high, isn't it?

Yeah, I mean, I think there are a couple of things I think about, right? See, if you look at Germany in particular, it's a unique thing, which is Germany is competitive, not just because of what happens in the German market. It's because of what is the intellectual property of Germany that is all around the world, right? I've always felt that Germany is successful. I mean, Germany is a big market. There's a domestic market. I think it should be a great producer of both AI factories as well as energy and what have you. But every time I go to a jewel or a dentist, I'm surrounded by the German middle start. That's kind of my thing where I think about the brilliance of Germany comes through. And so that means Germany is much more of an export-led economy than I think is talked about. And so therefore, what is most important, quite frankly, for German competitiveness in the age of AI would be, can they parlay their know-how, which is world-class, mix it up with AI to create more of the world-class know-how and knowledge and breakthroughs and innovation that then are exported everywhere. I look at, for example, even our data center bills, Matthias. I mean, what Siemens is doing and how they're really

going to be a critical part. They built this digital twin with them. And I mean, it's fantastic to see the innovation that they are bringing to the market in order to, for example, be a solution that speeds up everything, like the chilling solutions we need. All of these things, I think, do lend themselves very well to, I would say, Germany's economic growth. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools, no extra logins.

Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. if we speak about europe do you think europe should aspire for sovereignty in ai or is that a false goal i think that every country whether it's at the european union level or at the country level like in germany i think sovereignty is an important consideration like it is for the united States, right? So every country would like to ensure that there is continuity of their supply, there is resilience in their supply, and there's agency in which how they operate. And that's one of the reasons why we have made all these commitments. So the first is we are investing in Germany, in the European Union, with our capital, putting it at risk. So these are not AI factories or cloud factories that sit in the United States. They are in the continent and in the country. That's first. Second is we have now sovereign services, whether in the public cloud for all of the data to be protected, encrypted, the data plane, the control plane to be sovereign.

We even in Germany have a sovereign cloud. We have private cloud options. So basically, whether it's on the technology side, whether it's on the governance side, or even on the legal side, we're put in a framework, which is all our commitments for sovereignty. But the one thing I feel everyone's talking about this, which is very important, but I feel the new chapter of sovereignty is the one that I referenced earlier, right? It's got nothing to do with anything like this. It's about what is a German automaker or a German industrial company? How are they going to have their own AI factory and foundation model that is unique to them. That is, to me, the true definition of sovereignty. Not like, oh, I have a control plane and a data plane that I can sort of push VMs to. That is not the, oh, I've encrypted data. That's all important. But if you have done all that, except you don't have your own at a firm level, it's not even a country statement, The ability to be sovereign in an AI world, then I think, you know, that's, I think, the new frontier of sovereignty.

that's the day when you can go long. Would you take a bet who is going to develop artificial superintelligence first, China or America? And would America's chances to win that be higher with Europe or doesn't make it a difference?

I do believe that I always felt like the United States has been super successful because of its allies and its relationships all around the world. And most importantly, the trust the world has in American technology and American institutions. And so therefore, you know, the United States is what? 4% of the world's population. inflation, 25% of the GDP and 50% of the market. And that didn't happen because of just the US market. It happened because the US companies and US innovation reached all the parts of the world and there was real trust in it. So to me, I do believe the relationships, the market access, the trust between European Union and the United States is a pretty important thing.

But I mean, trust alone is not going to do it. And the fact that China has a population of 1.4 billion, they have access to all data and behavioral data of their population. The only limitation for them is basically what kind of dilutes their control of their own population. Everything else will be done. So you could easily make a case that it is more likely that China is going to develop that first and with that have a dominance. Well, I look at this and say, at the end of the day, you know, here we are in 2025. And, you know, every sort of benchmark, I mean, most of all, we have to got to give credit to China for all the sort of things that they're doing in the open source world in particular.

And I think we should continue to assume, after all, the human capital of China is just tremendous and they will continue to innovate. But here we are where the United States still continues to lead, right? Whether it's on the AI systems or whether it's the frontier models or the AI products around the world, right? And so to some degree, time will tell, but I would still be, I would bet on the ingenuity of the American sort of tech sector. But I would also say that it's not just the ingenuity of the American tech sector, but it also has to be about the, I would say, American tech stack being the most trusted tech stack in the world.

Because if you go back to my fundamental point, that look, at the end of the day, this is not even about a capability. It is about ultimately, who do I trust to help me have sovereignty? That's it. Like, I feel like every CEO and every country leader has to ask one question and answer it crisply. Who do I trust to sort of have as a partner who in the long run is going to make me successful? And, you know, when I think about Microsoft, that's kind of our position. I think when I think about the United States, that should be our position. Satya, you said that the more important technology gets and the more basically we delegate to bots and machines, the more important becomes empathy.

Is that one of the reasons or the main reason why you are now basically bringing people back to the office at Microsoft? No, I mean, look, first of all, you know, it's very interesting in this age of AI and automation and autonomous agents and so on. It's even more important to recognize how humans collaborate. collaborate. In fact, there isn't a substitute to workplace as the best collaboration tool. It's so fascinating. So I think at the end of the day, I do feel we've all learned a lot of what it means to collaborate over distance and remote and what have you. But there is a real sense that something gets lost when you don't bring people together. When I think about what I describe as the new production function. How do you get the product people, the science people, and the infrastructure people to really collaborate in new ways, right? To build that, you know, because this is one of the fascinating things. AI is not.

learned the context engineering that is needed. Whereas humans do, right? I can pick up social cues. I can pick up emotional cues, bring those things together in how I accumulate knowledge and I collaborate and innovate. And so I think, yes, the physical space is important, but it's not like I'm not so dogmatic that we were all remote once. We were never that. We're now all, you know, So in person, you know, we always have a lot more flexibility, empathy, to your point, requires us to understand, you know, the context a little better, but at the same time, not be too dogmatic on the two ends. But it really seems that people want to interact in person way more than ever.

Conferences are booming. Social events are booming. Life events are booming because it is about that interaction. So do you see that as a kind of general trend of civilization that EQ becomes more important than IQ because IQ is more and more a machine thing? I've always felt like, you know, I think, you know, I think, you know, basically IQ, EQ, and I think Mustafa likes to even talk about social intelligence or SQ. I think all these things, I think are important in human society. And in fact, if anything, if you're going to have these AIs that can then interface with us, they also need to develop a better sense of how to interface with our needs across these three.

And so, yes, I would subscribe to it. I mean, IQ has a place, but it's not the only thing that's needed in the world. And I've always felt, at least as leaders, you know, if you just have IQ without EQ, it's just a waste of IQ. Satya, we have to come to an end, but one more question. Is there anything that nobody knows about you that you could share with us now? Nobody knows about me. God, that is a hard thing. what would it be can be a can be a strength or it can be a weakness or it can be just an interesting fact the one weakness um i have for is for um these uh indian sweets um that oh my god like i cannot resist if anybody gets me anything and leaves it you know it'll be gone satya if you had to do an interview with yourself which would be the question that you would ask yourself that nobody so far ever asked you why is it that i start so many books but never finish next time we speak about the unfinished book satya thank you very much for taking the time love it thank you so much it was really fun cheers We'll see you next time.