Microsoft Cuts 4,800 Jobs and Sells Four Studios
A summary of the interesting content that I consumed this past week…
What I Read This Week: a summary of the content that I consumed this past week…
Caught My Eye…
1) The New Models: Grok 4.5, GPT-5.6, and Muse Spark 1.1
Three of the largest AI builders shipped new models within a day of each other. SpaceXAI released Grok 4.5 on the 8th. The next morning OpenAI began rolling out GPT-5.6 as three models named Sol, Terra, and Luna, and Meta launched Muse Spark 1.1. Meta made the largest structural shift, moving from open-weight model releases to their first paid closed model.
Each of them pushed for more affordable models while still maintaining performance.
Grok 4.5 costs $2 per million input tokens and $6 per million output tokens.
OpenAI’s smallest new model, Luna, lands at $1 and $6.
Meta’s Muse Spark 1.1 runs at $1.25 and $4.25.
Set that against the flagships still on sale: Anthropic’s Opus 4.8 at $25 for output, OpenAI’s own Sol at $30, and Anthropic’s Fable 5 at $50.
They also converge on what the models are built to do: run tools and operate software, rather than only answer questions. Meta built Muse Spark 1.1 for agentic work: a 1-million-token context window, the ability to run subagents in parallel, and training to click through desktop, mobile, and browser interfaces on a user’s behalf. Grok’s selling point is efficiency, finishing a coding task in roughly a quarter of the tokens Opus 4.8 uses. GPT-5.6 was directly implemented into their new product ChatGPT Work, a way to integrate your entire workflow fully.
By the makers’ own numbers, each model leads on a different axis, with none fully sweeping all benchmarks. On the same day, Claude decided to reset all 5-hour and weekly rate limits for their users.
2) DeepSeek Designs Its Own Inference Chip
On July 7, Reuters reported that DeepSeek is designing its own AI chip, which would allow it to rely less on Nvidia and Huawei. DeepSeek is the Hangzhou-based company whose cheap, open models jolted the industry in early 2025, and it is now widely regarded as China’s national AI champion. The chip targets inference, the stage where a trained model answers a user, rather than training, the far more expensive stage where the model is built. The effort is about a year old and still early, with the company in talks with chip designers, foundries, and memory suppliers.
Designing the chip is only the first hurdle. U.S. export rules cover certain foreign-made products built with American software or equipment, requiring suppliers such as TSMC, Samsung, and SK Hynix to obtain U.S. approval before providing controlled technology to China. That limits Chinese companies’ access to both leading-edge chip manufacturing and the advanced high-bandwidth memory needed to keep AI processors running at full speed. A strong design on paper does not become a competitive chip without both.
DeepSeek would be competing at home with Huawei and other tech rivals, including Alibaba and Baidu, who are already developing their own AI chips. Alibaba has its Qwen models, Baidu has ERNIE, and even Zhipu AI, the creators behind GLM, is starting to explore its own custom AI chips.
3) Microsoft Cuts 4,800 Jobs and Sells Four Studios
On July 6, Microsoft cut about 4,800 jobs, representing 2.1% of its workforce. Currently, Microsoft is the worst-performing Magnificent 7 stock this year, down more than 18%.
The majority of the layoffs came from its Xbox division, and four gaming studios will be spun out to be independent again. Xbox CEO Asha Sharma told the team, “Our business today is not healthy.“ It is on track to end the fiscal year at about a 3% margin, which is 3-10x lower than its competitors, and stands in stark contrast to Microsoft’s roughly 39% company-wide net margin.
Gaming revenue fell about 6% over the nine months through March, and console hardware sales dropped 33% from a year earlier.
Two forces are pulling the margin down. Game Pass, the $20-a-month subscription that delivers new titles to players on release day, undercuts the $70 those players used to spend per game. By Sharma’s own account, the bets on Game Pass and a broader content portfolio did not grow at the pace they expected while the core business also weakened. Buyers aged 18 to 24 spent roughly 25% less on games than in 2024 while playing more hours, most of them inside free platforms like Roblox and Fortnite.
It was also revealed that Asha Sharma will be joining the new Fed task force on Productivity and Jobs, along with Marc Andreessen of A16Z, and Charles I. Jones, Stanford professor of Economics who is currently working at Anthropic. They are tasked with assessing the economic impact of new general-purpose technologies such as AI and helping inform the Federal Reserve’s policy judgments.
At the same time, news broke out that companies like Starbucks are now developing AI software that could replace several enterprise applications currently supplied by Microsoft.
Learn With My Friends and Me…
OpenAI vs Anthropic IPOs, Anthropic $3T, Zuck’s Price War, China Ends Open Source?, Trump Accounts
The New Private Asset
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Other Reading…
AI’s Value Capture Problem (Jaya Gupta)
46 Thoughts on the Near Future (bayeslord)
Institutional Sovereignty in the Age of AI (Palantir)
On X…
Can you shed some light on why they would fire 4k American workers while concurrently aplenty for 2.5k H1B visas? Just seems like they are destroying American workers to bring over foreigners. Maybe there is more to it but it needs to be explored.