The intersection of two of tech’s most influential leaders—Elon Musk and Satya Nadella—on the Microsoft Build 2025 stage encapsulates the complex, fast-shifting landscape of generative AI and industry alliances. In a keynote discussion broadcast via Microsoft’s YouTube channel and marked by candid recollections and strategic vision, Musk and Nadella broke new ground: Microsoft’s Azure AI Foundry is now officially hosting Grok, the large language model suite from Musk’s xAI, as first-party offerings. This move is especially notable given Musk’s ongoing legal feud with OpenAI, a close Microsoft collaborator, and signals a deepening if pragmatic collaboration between xAI and Microsoft, as reported by GeekWire.

Nadella opened the conversation by highlighting Musk’s early roots at Microsoft as a Windows developer and intern—a detail underscoring the industry’s long memory and interwoven narratives. Musk, characteristically direct, reminisced about programming video games on DOS and Windows 3.1, setting the stage for a discussion centered on first principles—both in technology and AI model design.

At the heart of Musk’s appearance was Grok 3.5, the soon-to-launch iteration of xAI’s model family. Musk articulated an ambition for Grok that goes beyond incremental accuracy: “It’s trying to reason from first principles, so apply kind of the tools of physics to thinking.” Musk described a methodology in which Grok seeks to deduce fundamental truths by boiling down issues to their axiomatic elements and then reasoning upwards—mirroring the scientific method. “In physics, if you violate conservation of energy or momentum, you’re either going to get a Nobel Prize or you’re almost certainly wrong,” Musk quipped.

The pronounced focus on “reasoning from first principles,” in Musk’s framing, is not just about technical prowess but essential to AI safety. Errors are inevitable, but, as Musk stated, “we aspire to correct them very quickly,” emphasizing both humility and a commitment to rapid iteration. He returned repeatedly to the maxim “honesty is the best policy,” asserting it as foundational for safe AI development.

A striking portion of the dialogue discussed Grok’s grounding in physical reality. Musk insisted that to build truly intelligent systems, models must be judged by their ability to make predictions consistent with the laws of physics. “Physics is the law and everything else is a recommendation… I have not seen anyone break the laws of physics,” he noted. This grounding is not merely philosophical—it is operational, with Grok being deployed in real-world, high-stakes environments at Tesla (for autonomous vehicles), SpaceX, and with the humanoid robot Optimus.

Applications in these domains serve a dual role: they provide real-time feedback loops essential for model improvement, and they impose an external, non-negotiable reality check. As Musk explained, “For any given AI, grounding it against reality… is very helpful for ensuring that the model is truthful and accurate because it has to adhere to the laws of physics.”

Nadella, for his part, framed this approach as a template for AI at scale: “Cracking the physics of intelligence is perhaps the real goal for us to be able to use AI at scale.” He painted a future in which language models, vision, and action come together, all anchored in a robust model of the physical world.

The partnership between Microsoft and xAI, as highlighted by Tom’s Guide and GeekWire, raises strategic questions. Microsoft’s Azure already offers access to models from OpenAI, Meta, and others—a reflection of its platform strategy. Yet, welcoming xAI’s Grok to the roster is a particularly pointed move amid corporate rivalries and regulatory scrutiny of AI market dynamics.

Musk closed by inviting developer feedback, reinforcing xAI’s intent to build iteratively and responsively: “We’re really looking for feedback from you, the developer audience. Tell us what you want, and we’ll make it happen.” The collaboration between Musk and Nadella ultimately signals not just a détente but a new front in the AI model arms race—one where first principles, physics, and open competition increasingly define the future landscape.

Sources: GeekWire, Tom’s Guide, Microsoft YouTube Channel.