In a revealing conversation at a recent tech conference, Meta’s Mark Zuckerberg and Microsoft’s Satya Nadella shared their vision on AI transformation, open-source models, and how these technologies are reshaping the future of work. Their discussion offered rare insights into how two of tech’s most influential leaders view the rapidly evolving AI landscape.
The AI Revolution: Another Major Tech Transformation
Satya Nadella compared the current AI boom to previous major tech shifts he’s witnessed throughout his career.
“I grew up when the client was being born. I joined Microsoft just after Windows 3, and I saw the birth of client-server, then the web, mobile, cloud, and now AI,” Nadella explained. “It’s interesting — each time there is this transition, everything in the tech stack gets relitigated. You get to go back to first principles and start building.”
What makes this transformation different is how it’s forcing companies to rethink infrastructure from the ground up. The core storage systems for AI training don’t resemble traditional systems, and even the workload patterns are fundamentally different from previous computing paradigms.
The Economics of AI: Efficiency Driving Consumption
One fascinating trend both leaders acknowledged is how efficiency improvements in AI are creating explosive growth in consumption. As models become more capable and costs decrease, usage skyrockets.
“When you have capability improvement at that rate and prices drop at that rate, fundamentally consumption goes up,” Nadella observed. “I’m very optimistic that we’re at a stage where deep applications can get built.”
Nadella highlighted how we’re finally reaching a point where applications can orchestrate multiple AI models together, creating more powerful systems than single-model applications. The evolution from tightly coupled single-model applications to flexible multi-model systems represents a major leap forward.
The Open Source Advantage
Throughout their conversation, both leaders emphasized the importance of open source in the AI ecosystem. Microsoft’s shift toward embracing open source under Nadella’s leadership has been dramatic, and he explained the philosophy behind it:
“Interoperability is what customers demand. If you do a good job of it, that’s good for your business, and you’re meeting customers where they are,” Nadella said. “I’m not dogmatic about closed source or open source — both are needed in the world. In fact, customers will demand them.”
The value of open source becomes particularly evident when companies want to distill models they own. As Nadella explained, “A lot of my enterprise customers want to distill models that they own — it’s their IP. In that place, an open source model has a huge structural advantage compared to a closed model.”
The Distillation Factory: Democratizing AI
One of the most exciting concepts discussed was what Nadella called the “distillation factory” — infrastructure that allows developers to take large foundation models and create smaller, specialized versions.
Zuckerberg highlighted how distillation enables incredible efficiency gains: “It’s magic. You can get 90% or 95% of the intelligence of something that is 20 times larger in a form factor that is so much cheaper and more efficient to use.”
Currently, only a small number of labs worldwide can perform this kind of distillation or operate models at the largest scales. Both leaders seemed excited about democratizing this capability, making it accessible to more developers and organizations.
Zuckerberg noted that Meta built Llama 4 with 17 billion parameters per expert because an H100 GPU is their atomic computing unit, but acknowledged that many developers need different form factors: “Being able to take whatever intelligence you have from bigger models and distill them into whatever form factor you want to run on your laptop, on your phone… I think is one of the most important things.”
AI’s Impact on Productivity and Work
Both leaders are seeing dramatic changes in how AI is transforming work inside their own organizations. When asked about how much code at Microsoft is now written by AI, Nadella estimated:
“Maybe 20–30% of the code inside our repos today in some of our projects is probably written by software.”
But the impact goes beyond code generation. Nadella described how AI is changing his own workflows:
“The workflow of how I get ready for an enterprise customer meeting has not changed since 1992 when I joined Microsoft. Basically, someone will write a report that’ll come in email or will be shared in a document, and I’ll read it the night before. Now I just go to Researcher and Copilot and I get the combination of what’s on the web, what’s internal, and even in my CRM, all done in real time.”
This shift requires changing work artifacts and workflows, which happens “slowly at first and then all of a sudden,” according to Nadella.
The Future of Development: Engineers as Tech Leads
Looking forward, Zuckerberg suggested that “every engineer is effectively going to end up being more of a tech lead in the future that has their own little army of engineering agents that they work with.”
This vision represents a profound shift in how software development will work — moving from hands-on coding to orchestrating and directing AI systems that do much of the implementation work.
Will AI Drive Economic Growth?
One of the most thought-provoking moments came when Zuckerberg asked Nadella about his outlook on AI’s economic impact.
Nadella framed AI as an “existential priority” for the world economy: “The world needs a new factor of production and input that allows us to deal with a lot of the challenges we have.”
He suggested we should be asking: “What would it take for the developed world to grow at 10%?” For that to happen, we need productivity gains across every sector — healthcare, retail, knowledge work, and more.
But Nadella cautioned that technology alone isn’t enough: “It’s not just tech. Tech has got to progress. You’ve got to put that into systems that actually deliver the new work artifact and workflow.”
He drew a parallel to the adoption of electricity, which took decades to fully transform industry: “People always quote what happened with electricity — it was there for 50 years before people figured out that we got to really change the factories to use electricity differently.”
Breaking Down Software Boundaries
One of Nadella’s most interesting observations concerned how AI might finally break down traditional software boundaries:
“What’s the difference between a chat session and a document and an application?” he asked. “This idea that you can start with a high-level intent and end up with what is an artifact that is a living artifact that you would have called in the past an application is going to have profound implications.”
He suggested that artificial category boundaries that were created due to software limitations might finally dissolve: “Why are Word, Excel, PowerPoint different? Why isn’t it one thing? Now you can conceive of it — you can start in Word and visualize things like Excel and present it, and they can all be persisted as one data structure.”
As the conversation between these two tech leaders showed, we’re not just in another hype cycle — we’re witnessing the foundational layers of a new computing paradigm being built. The companies and developers who understand how to harness both closed and open AI models, who can build effective distillation systems, and who can reimagine workflows rather than just automate existing ones will be the ones who lead this transformation.