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Microsoft swaps in its own AI models: After years of relying on powerful third-party AI models from labs like Anthropic and OpenAI, the tech giant will try to keep a lid on compute costs by swapping in some of its homegrown options. Across myriad applications, from Excel spreadsheets to Outlook emails, Microsoft will power up its internally-built theoretically capable enough MAI models for straight-forward, everyday tasks. As “pretty good but cheap” options continue edging out “the MOST massive and powerful” models across enterprises, Bloomberg reports that this is part of an overall effort by Microsoft’s AI model lead Mustafa Suleyman to cut costs by developing alternatives to costly options like Opus 4.8. Not just across its consumer apps but eventually also for the workplace and coding assistant, Copilot.
Meanwhile China cracks down on chatbots: New, comprehensive Chinese government regulations prohibit domestic AI platforms from producing content or hosting interactions that trigger “extreme emotions” in minors or foster “unhealthy emotional dependencies” in users more generally. (Using “sensitive” data from user conservations to train future models is also banned.) These perhaps purposefully vague directives are already having an impact in the kinds of AI apps being released for the Chinese market. ByteDance and Alibaba both pulled the plug on new chatbot features in light of the new regulations, including a system from ByteDance’s Doubao for customizing your own AI persona.
Norm AI hits unicorn status: The legal AI startup raised an additional $120 million from investors, in a round led by Khosla Ventures, at a valuation of $1.2 billion. (The company has raised around $260M to date.) In addition to designing tools and products that boost attorney (and paralegal) productivity, Norm has also launched an independent affiliate law firm (Norm Law), which uses their products and charges clients based on outcomes rather than billable hours. The new funds will go to both developing the AI products themselves and hiring additional attorneys to utilize them (and, of course, train future versions along the way).
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Speaking of Chinese open source AI alternatives, as we so often are…
Reuters reports that DeepSeek — the original success story that first drove home how intense the open source vs. closed frontier model race was going to become — now plans to develop their own chips. DeepSeek has been meeting with potential silicon partners for the project, which will focus exclusively on chips to power inference, as opposed to model training.
The explicit goal: making the company less reliant on both domestic chip maker Huawei and global leader Nvidia, whose most powerful chips are already blocked from distribution in China by export controls. Important to note: DeepSeek are not the only AI lab making these kinds of plans. Domestic rivals Alibaba and Baidu have also explored the possibility of designing their own silicon, and a number of US model makers (most recently OpenAI) are dipping their toes into homegrown chips as well.
Speaking of OpenAI, Wall Street Journal reports that — along with key rivals Anthropic — they’re offering a whole lot of computing power to potential enterprise clients at massive discounts. One founder told WSJ that SpaceX-owned Cursor offered his company a 75% discount on compute, while others reported that Google is offering not just hundreds of thousands in Google Cloud credits but also early access to Gemini models and even valuable time consulting with DeepMind engineers!
It may all sound super enticing, but bear in mind Jason’s warnings… There are no free lunches, and the big AI labs likely want to study your startups and data so they can potentially steal your concept and customers down the road. – Lon
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This Week in Startups
E2308: First up, Alex chats with Hanover Park CEO and co-founder Chris Hladczuk about what $100 trillion+ in global assets are being overseen by what he calls “human duct tape.” That is, teams of accountants working in back offices, patching together important data and results from a variety of legacy applications (like QuickBooks and Bill.com) that are essentially holding them hostage. His startup suggests that AI is the answer. PLUS Alex and Lon look back on a classic TWiST chat from March 2020 between Jason and Figma CEO Dylan Field.
E2307: Forget the triple-triple-double-double-double; the new bar for startups hoping to raise venture capital has reached the stratosphere, though our venture panel is worried that startups are focusing too much on today’s problems that may not become companies tomorrow. During a lively VC roundtable, Cowboy’s Aileen Lee, Floodgate’s Mike Maples, and Lerer Hippeau’s Ben Lerer joined Alex to dig into exiting pre-AI startups, rising valuations, token spend, why they are keeping their funds small, and whether the government just tripped OpenAI and Anthropic!
E2306: It’s the debut of our new Summer 2026 series “TWiST All Stars.” We’re inviting back some of Jason’s favorite guests from throughout the long history of the pod, and we’re kicking things off with one of his “Besties,” investor and 8090 co-founder/CEO Chamath Palihapitiya. He’s talking about the groundbreaking development platform, which is helping enterprises save money and protect their data by building out their own internal software. Plus he shares with Jason his origin story, why he started the Learn With Me and Drink With Me communities, his advice for young people graduating college in the age of AI, and more.
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