Microsoft has agreed to pay Inflection about $650 million while hiring the AI startup's staff, a person familiar with the matter told Reuters on Thursday.

The transaction is mostly in the form of a licensing deal that makes Inflection's models available for sale on Microsoft's Azure cloud service, the person said.

Inflection is using the licensing fee to provide some investors, including Greylock and Dragoneer Investment Group, one-and-half times of return, the source added.

The software giant hired Inflection co-founders Mustafa Suleyman and Karen Simonyan, along with several employees of the AI firm, for a newly created consumer AI unit called Microsoft AI as it looks to expand its capabilities in terms of artificial intelligence.

Suleyman will be CEO of the unit, while Simonyan will join as chief scientist.

The news about the deal was reported earlier in the day by the Information.

Microsoft declined to comment, while Inflection AI did not immediately respond to a Reuters request for comment.

Inflection AI has emerged as one of the most high-flying names in the GenAI race after raising $1.3 billion from Microsoft and Nvidia in a mix of cash and cloud credit at a valuation of $4 billion in June.

  - Reuters