Microsoft CEO Satya Nadella has expressed his optimism about the rapid advancement of artificial intelligence (AI), stating that the technology has reached a state of "hyperdrive" with a 10x performance boost every six to 12 months. During a fireside chat with Meta CEO Mark Zuckerberg at Meta's inaugural LlamaCon developer event, Nadella revealed that AI has already built up to 30% of the code currently in Microsoft's repositories.

Nadella attributed the rapid progress to improvements in chip technology, cycle times, system software, model architecture, and kernels. He described the current pace of innovation as "crazy" and likened it to multiple S curves compounding upon each other. The Microsoft CEO believes that open source will play a crucial role in the development of next-generation AI capabilities, such as multi-agent AI orchestration.

In this context, Nadella envisions an orchestration layer that would allow users to mix and match AI models, pulling different aspects of intelligence from various models in areas where they excel. He emphasized the importance of interoperability between different products, including SQL, MySQL, Postgres, Linux, and Windows, to enable customers to distill custom models built with their intellectual property (IP). Open weight models, according to Nadella, will have a significant structural advantage in supporting this capability compared to closed models.

Model distillation, which involves taking a large model and distilling it into a smaller model with the same model shape, is a key use case in this scenario. Nadella noted that the challenge lies in making this capability available to those who lack the infrastructure or technical sophistication to build their own models. The goal, he said, is to build tooling for these models as a service, which hyperscalers can deploy as a cloud service and build tools around it.

Zuckerberg agreed with Nadella's vision, describing model distillation as "like magic" and highlighting its potential to provide 90% or 95% of the intelligence of a larger model in a more efficient and cost-effective form factor. However, he also raised concerns about ensuring the safety and security of distillation, particularly when open source models are coming from different countries.

The discussion also touched on the growing role of AI in coding, with Nadella estimating that up to 30% of the code in Microsoft's repositories has been written by software. Zuckerberg predicted that maybe half of software development will be completed by AI in the next year, and eventually, every engineer will effectively have their own "little army of triggering agents."

However, Nadella emphasized the need for successful integration of AI into current repositories and developer workflows, highlighting the importance of systems work in achieving productivity gains. He described AI as an "existential priority" that will require developers to work fearlessly and drive cultural and management changes to unlock its full potential.

Ali Ghodsi, co-founder and CEO of Databricks, also participated in the discussion, echoing Nadella's sentiments about the importance of open source in driving rapid progress in AI. Ghodsi noted that everything is moving towards open source, enabling a "cross-pollination" of different models and rapid innovation. He urged developers to explore new ideas and use open source models to create a "flywheel" or network effect, continually iterating on and improving products with use.

The conversation concluded with Ghodsi's assertion that we are currently in "Day Zero of the AI era," with the most amazing applications yet to be invented. The "data advantage" will be the underpinning of success, he said, and builders need to collect the right data, refine it, and pass it through models to create a continuous cycle of improvement.