Microsoft's plan to catch up in AI

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0:56David Pierce:Hello and welcome to the Vergecast, the flagship podcast of the Windows subsystem for Linux. I'm your friend David Pierce, and on today's show, we're going to talk about Microsoft Build. Build is Microsoft's big annual developer conference where it launches a bunch of new stuff, but also tries to just explain itself to the world and what it cares most about and what it hopes that all of its customers care about for the year to come. Big surprise, the answer this year was AI in every single imaginable way. We're gonna get into all of that in just a minute, but first, here's everything else happening on The Verge today.

1:29David Pierce:This is 90 Seconds on The Verge for Thursday, June 4th, 2026. Instagram's new Instagram Plus subscription is rolling out, and the idea is essentially for$4 a month, you can get custom app icons, you can get a custom font in your bio, lots of little aesthetic things like that. But the big stuff is you can now keep your story up for 48 hours instead of 24. Or you can give your story more priority in other people's feeds so that people see it. And you get to watch other people's stories without them knowing. I think a lot of people are going to pay$4 a month for just that one feature alone. But the big idea here is Meta increasingly wants you to pay to get your content seen, even by the people who have said that they want to see it.

2:07David Pierce:Feels kind of bleak, if I'm honest with you. TSMC, the world's largest semiconductor manufacturer, said it's struggling to keep up with AI demand. Its CEO, CeCe Wei, said at a shareholder meeting that customer demand is so high and we can only support so much. He said, we are doing our best to ensure TSMC does not become a bottleneck. In a time where RAM is getting more expensive than ever, chips are harder than ever to find, and it is more expensive than it has ever been to buy gadgets, this feels like bad news. Especially because the CEO, CeCe Wei, also said he'd like to raise prices and that it's going to be a long time to be fully up to speed on production in the US.

2:45David Pierce:Not a great sign for the price of electronics. In better news, Cash App made a magic wand for paying for stuff. It's called the Cash App Wand, and it's an NFC-enabled, star-topped wand that you can use to make on-the-go payments just by tapping. There's a big DIY trend here of people making things that are more fun to tap and pay with than a credit card or like your watch or your phone. I think it's incredibly charming. I love that Cash App is doing this. It's$25, and apparently there are more of these app tags to come. I'm excited about it. You can read more about all of this at TheVerge.com.

3:18David Pierce:That is 90 Seconds on The Verge for June 4th. All right, let's get into Build and Microsoft's big plans for Windows, AI, and the future of pretty much absolutely everything. Joining me, Tom Warren, who was at Build all week from San Francisco. You're at Build. You've been doing the Build thing all week. Tell me about the vibes. I remember last year's Build. Weird vibes. Yeah, very weird. Everybody was very angry. Protests interrupting things. this one seems like it's been a little more sane in a certain way a little more straightforward from Microsoft's perspective

3:49Tom Warren:Yeah, so this year the whole point of Build this year is that it was a smaller sort of intimate venue in San Francisco, so they used to have Build at San Francisco, I can't remember, it was many years ago now. There was a few protesters outside early yesterday morning, there's none today but they didn't get inside this time, so there wasn't the sort of chaos that we had last year where the keynote was interrupted and all that sort of stuff. But yeah, the vibes definitely feels smaller and definitely more about getting actual developers in this time.

4:21David Pierce:I get the definite sense Microsoft is trying to use this year's build to sort of stake its claim in the AI universe. There's a lot of stuff going on and I want to get into some of it, but I'm curious what your sort of big picture takeaway is in terms of like, what does Microsoft want to be in a world filled with AI?

4:40Tom Warren:I obviously spoke to Mustafa Suleiman yesterday and he kind of took the gloves off, essentially, which I think I get the sense that he's been wanting to do that for a little while. But just basically he said, we want to be one of the top four AI model creating frontier models in the world. I think we haven't heard them say that exactly before because they've had that really close OpenAI partnership. So I think that was a big part of Build this year. It was the sort of coming out party for Microsoft AI and the models and stuff. They had like seven models and so that was a big chunk. But then on the flip side, I think the other thing is there was a big presence of Windows again, which I kind of think they had to have, but also in the sense of positioning Windows to developers has been able to have this local AI compute so they don't have to worry about the tokens, which is the kind of era that we're getting into now.

5:32Tom Warren:It's like it's the cost of AI now, right? And then all the token usage, And that's really bubbling up in the news cycle at the moment.

5:38David Pierce:Let's start with the AI stuff, because I think this question of can Microsoft be the fourth big player in this space? Right. Obviously, it's Google DeepMind, Anthropic and OpenAI are like it's those three big gap, everybody else. Microsoft sort of in an awkward way was tied to open AI. And I think they've broken up in sort of, you know, they claim it's on good terms, but it actually increasingly seems like these two companies really hate each other and are desperate to get away from each other. And is this, did this feel to you like Microsoft sort of laying out its own full plan on how to do this?

6:19David Pierce:Because, you know, they put out an operating system for AI agents. They shipped a bunch of developer tools for Terminal. It really did feel like Microsoft being like, well, all this other stuff has been happening. We did all these partnerships with OpenAI, but we now have a whole plan of Microsoft's to take on all of these companies all at the same time. Do you feel like Microsoft successfully made that case?

6:43Tom Warren:Yeah, I think so to some extent. I think the Microsoft AI stuff, they obviously had seven models. And again, they were kind of like the smaller models, but then they had the reasoning one, which I think that's definitely a step forward from what they've been doing before because typically it's been very focused on specific tasks, whether it be images or transcription, all that sort of stuff. But this reasoning and the thinking model is a lot about math and code, right? Which is where they've kind of been falling behind. So like Claw code and Cursor and all the rest of those coding tools. So I think they've definitely put a stake there.

7:21Tom Warren:They want to go progressively after coding.

7:23David Pierce:And I think Microsoft was early to, right? They were early to, right? GitHub Copilot stuff was way ahead of a lot of this stuff. And then Microsoft got kind of left behind by the state of the art here.

7:32Tom Warren:Yeah, exactly. So I think they're trying to reverse that trend. They've successfully done that, I think, the first step. It's just the question of where do they go next. And obviously, Stuff has said that they want to be the top four. How they go about that is going to be very interesting. He actually said also to me that they're going to lean on OpenAI for the next few years, right? Because obviously, they've got access to their models for quite some years yet. So they can lean on them for certain stuff whilst they basically compete, right? And then build their own. And so that's kind of interesting perspective, which is, it's unusual to hear that from an executive, to be honest.

8:06Tom Warren:But it's kind of what we thought all along anyway, really, isn't it? But yeah, I think they've definitely, they've definitely started to shift the sort of message around AI now. Funny thing, alcohol keynote, I think Copilot was only mentioned five times. without it being GitHub Copilot. Yeah, that's the one thing out of the keynote is that Copilot was barely mentioned. Like they announced the Surface laptops, their Copilot plus PCs. It didn't even say Copilot plus PCs. Like it's very, they're very much trying to clean up that, trying to shove Copilot everywhere.

8:40David Pierce:So, okay, you just made a thing make sense for me that I was actually going to ask you about, which is Scout. This is one of Microsoft's biggest announcements was this thing, Scout, that is this sort of agentic, like Spark, open claw-ish model. It seems like if you're Microsoft, this is a huge place to try and do some of your own stuff, right? And we've talked a lot about the advantages that Google has in AI, where it makes a lot of apps that people use. It has a lot of data about people. Microsoft has exactly the same thing going on for like every company everywhere. So the idea of being able to do an AI agent that sort of knows you and your business makes tons of sense.

9:14David Pierce:And my immediate response is, isn't this exactly co-pilot? Why on earth is this not just Copilot? But maybe you just answered that question.

9:23Tom Warren:Well, so the real interesting insight into this is that Copilot is run out of a different organization to where Microsoft Scout came from. What they also did is they announced a Copilot sort of super app or autopilots is what they're called. And then they kind of shoved Microsoft Scout inside of there. But that thing does not exist. It's just a mock-up. Sources are telling me it literally doesn't exist. They've just created this image, essentially. So there's obviously some internal politics going on here because the Scout stuff is on the other side of the house. But it is essentially supposed to be your sort of personal assistant, right?

10:00Tom Warren:Like OpenClaw is literally OpenClaw, but for the enterprise.

10:02David Pierce:Do you think Copilot is like a lightly toxic brand at this point? I mean, you've covered a lot, the sort of relentless encroaching of Copilot into everything. And Microsoft sort of way overplayed its hand and has spent some time winding that back, getting Copilot out of things. Is it possible that it's just, it's so overextended Copilot that it now has a branding problem that it's going to kind of slowly try to walk away from?

10:26Tom Warren:Yeah, I think that's definitely what's happening. There's no doubt of that. I wouldn't say it's like necessarily toxic, but I think it's just they didn't really have focus with it. They just started to use Copilot everywhere. The first was obviously GitHub Copilot and then Microsoft kind of like borrowed that, stole it, whatever you want to call it. It just ended with like co-pilot buttons in paint and in notepad and just all this craziness. So I think they're definitely walking back where co-pilot shows up and to make it more like how that super app is. So they're going to sort of get all those things that they've done and put them all into this single app.

11:02Tom Warren:But yeah, they definitely have a branding problem with it.

11:04David Pierce:So the other thing I'm curious about is Project Solara, which I think to me is like the consumer products person. This is the thing I found most interesting from the whole thing is they built a new operating system for agents, essentially, right? And this is the big open question right now is, if you believe that AI agents are going to be foundational to how we use computers going forward, what are our computers supposed to look like? And obviously this is part of the NVIDIA RTX Spark question. And if you're Microsoft, it's very important that you get this right. Because if you get it wrong, Windows goes away, right?

11:40David Pierce:This becomes sort of existential in a way. Can you explain sort of what Solara is and what you thought of these demos? I'm curious what they've struck me.

11:49Tom Warren:Yeah, so it's built on the Android open source project. So they've basically forked that. And then it's essentially going to be a platform for agents across devices. So we've seen Microsoft do this sort of platform play multiple times in the past. A lot of the time it's obviously been Windows. but you've seen like Microsoft Band, HoloLens, Windows Phone obviously. They've always tried to position themselves as a platform for future hardware, right? And it hasn't gone well. So I'm very skeptical of it, but I'm also intrigued by it. But I think the most curious thing about it is that they're positioning it as a platform that will run across devices like they showed a badge concept, which was like your security card where you could touch a button, it would transcribe and all that sort of stuff, use a camera.

12:39Tom Warren:And then you've got this like Amazon Echo Show sort of like device that just scans your face, logs you in, and you've got your agent. But I think they're not going to make those devices themselves. They're sort of trying to position this as we are going to build the platform, secure, et cetera, for enterprise use and all that sort of stuff. But it just depends. Are people going to, you know, use that platform on their devices? That's the big question.

13:02David Pierce:Yeah, I think that there are so many sort of ongoing questions about like, what is Microsoft trying to be in this space again, right? Like, is it happy if all of it runs on Azure, but not on Windows? I don't know. I just, but I will say, I thought the badge concept ruled. Like, again, this idea of if you're Microsoft and you're trying to think, okay, how do we get AI agentic wearables into people's lives in a way that is Microsoft-y? Doing it as an employee badge, genius. Like, perfect, correct answer. It's a thing tons of people are already wearing. It's a thing they have on all the time. And if you can give it some of this sort of inputability, like there was a demo where it's a person standing over some kind of piece of paper pointing the camera at it.

13:44David Pierce:That's right, yeah. It's on their badge and it's inputting that way. You can use it as a voice recorder. It can display information. Again, thousands of caveats. This was essentially like a science fiction concept video. But that to me was one of the moments where I was like, this is the most complete thought from Microsoft about how a Microsoft-led AI thing might work that I've seen yet. And there was just something about that that I found very compelling from Microsoft in particular. that was like, oh, maybe this company gets what they're going for now.

14:16Tom Warren:Yeah, no, I totally agree. I think the badge concept was super interesting. I think it's just, where does it go from there? Like, they showed some other sort of vague devices, didn't they? Like, that they obviously weren't focusing on. But I think it's, like, they tried this with Cortana. Do you remember? They had, like, thermostats, speakers. And obviously, that was before we called that, you know, that was machine learning back then, right? Now it's AI. but yeah that didn't really go anywhere and they kind of abandoned that so I'm just like that's why I'm so skeptical because I've seen them try and do this so many times in the past but I think they have the right vision but I worry that someone else will just do it

14:56David Pierce:It did seem to me that this build was ironically for a developer conference more developer focused than normal and I think to some extent this is what you were talking about at the beginning like ordinarily They have lots of salespeople there, and it's about sort of lots of people in lots of places. This felt very much like Microsoft recentering itself on developers. They spent a lot of time talking about Linux and the terminal and developer tools. Am I overthinking what happens at a developer conference here, or does this feel like Microsoft's actually refocusing its efforts on people who are this kind of developer that everybody is after in an AI world?

15:38Tom Warren:No, I think so. They've been trying to win back developers' trust and confidence in Windows in particular for quite some time now. Obviously, a lot of developers just use Mac OS or they might be on Linux as well. They've been trying to get those people to take Windows seriously for development. They did the Windows subsystem for Linux many years ago and they've built on top of that build. A lot of the Windows announcements this year were very, very developer focused. I mean, there pretty much wasn't anything outside of dev stuff, which I think is good because in some years over the past decade, they've gone very consumer heavy at Build.

16:17Tom Warren:But they've done like the Terminal work as well in the past. I think this year it felt like that kind of Build. Because I remember when they unveiled Terminal, people were going nuts in the audience. Like it was genuine. It wasn't like Microsoft PR people screaming in the corner, you know?

16:33David Pierce:In a funny way, the world is coming around to Microsoft on that front, right? Like what we've seen is this giant push towards, you know, this is going to change the consumer landscape of everything. And then all of these AI companies kind of led by Anthropic, but OpenAI has caught up really fast and Google is now on this too. They've all realized that fundamentally this is business software and they're now trying to build it out as business software. And it feels like this is the thing that Microsoft in theory is very good at and is actually perfectly suited to capture is this idea of how do we bake AI into your business processes?

17:08David Pierce:Like no company is better set up to do that at scale than Microsoft. And I just got this sense of like, you and I have talked many times about Microsoft's inability to help itself from trying to be a consumer company. It feels like if ever Microsoft is just going to confidently get back to being a business company, this is the time. And it has a real shot at catching up very quickly if it can pull it off.

17:31Tom Warren:Yeah, that's the thing. like it's almost like an existential crisis isn't it for Microsoft because if they don't pull this off they have you know Office and Windows and all of this enterprise platform stuff like M365 etc but that could all just disappear right like it's not a guaranteed business anymore in this era where a startup can just create something that just takes all that way but that's that's what it's all about. They need to capture that audience that they already have on the enterprise and get them using their own tools before they run off to use someone else's. And there's been obviously friction internally with the OpenAI stuff where they've been competing.

18:12Tom Warren:They've been on this weird path where they're sort of trying to get the same sort of customers. And I think if there's ever a time where they need to make this work, it's right now for sure.

18:24David Pierce:I keep seeing celebrities' posts, Me in the 90s versus now. While the person staring at me in the mirror is definitely not the same person that could pull off bootcut jeans, time creeps up on us so slowly. You don't see it until suddenly you do. Same thing goes for your bills. A dollar here, an uptick there. It's a slow burn until one day you realize the price you're paying now is way higher than when you signed up. But at T-Mobile, customers had the lowest wireless bills versus Verizon and AT &T over the past five years. And with T-Mobile on their experience plans, you get a five-year price guarantee so you know exactly what your plan price will be for the next five years.