Microsoft has made a trio of significant announcements this week, solidifying its commitment to artificial intelligence (AI) and signaling a major shift in its approach to software development, customer services, and revenue generation. The company has created a new AI engineering group, relaunched Copilot Chat, and bundled Office AI features into Microsoft 365, demonstrating its insatiable hunger to win in the AI space.

The new CoreAI – Platform and Tools division, led by former Meta engineering chief Jay Parikh, will combine Microsoft's Dev Div and AI platform teams. This reorganization, described by CEO Satya Nadella as "entering the next innings of this AI platform shift," aims to put AI at the heart of Microsoft's tools, platforms, and services. Nadella envisions a future where Microsoft's AI agents can eventually build custom applications, transforming the company from software-as-a-service to service-as-software.

Microsoft's relaunch of Copilot Chat, now with free ChatGPT-like capabilities and pay-as-you-go agents, is a strategic move to get people hooked on using AI at work. The company is betting on its ability to automate many people-based services and package them into software solutions that can be sold to businesses. This approach has the potential to disrupt traditional software development and create new revenue opportunities.

The bundling of Office AI features into Microsoft 365 Personal and Family subscriptions, accompanied by a $3 per month price increase, is another significant move. This change is likely a precursor to similar moves for commercial customers, as Microsoft faces increasing pressure from competitors like Google, which has made its Gemini Business plan free and is bringing all AI features to its Workspace app at no extra cost.

As the competition heats up in 2025, Microsoft is expected to come up with even more inventive pay-as-you-go agents or AI credit methods to get consumers and businesses addicted to AI. The company's transition to an AI-first approach will undoubtedly see engineering jobs change, but investors are increasingly looking for returns on Microsoft's big bets on AI.

In related news, Microsoft has stopped supporting Office apps on Windows 10, warning that it will no longer support these apps after October 14th. The company is also testing Windows x86 emulation on Apple silicon Macs and has committed to complying with the European Union's AI Act.

With these announcements, Microsoft is sending a clear message about its AI ambitions and its willingness to invest heavily in this space. As the company continues to evolve and adapt to the rapidly changing AI landscape, it will be interesting to see how its competitors respond and how this shift impacts the broader tech industry.