Microsoft is actively expanding its AI business in China, integrating models from Chinese firm DeepSeek into its Azure cloud platform, even as its closest AI partners, OpenAI and Anthropic, are raising alarms about Chinese companies copying their technology.
Microsoft co-founded the Frontier Model Forum alongside OpenAI, Anthropic, and Google, a group that has been working since at least April 2026 to counter what it calls “adversarial distillation practices” by Chinese entities. At the same time, Microsoft is testing DeepSeek’s latest model for its own enterprise products.
The DeepSeek play
DeepSeek’s R1 model landed on Azure AI Foundry and GitHub back in January 2025, joining a catalog of over 1,800 AI models available to enterprise customers. The pitch was straightforward: DeepSeek’s models cost significantly less to train and run than comparable Western alternatives.
As of June 2026, Microsoft is testing DeepSeek-V4 for its Copilot Cowork applications. The motivation is blunt economics. Inference costs from OpenAI and Anthropic models have surged, and Microsoft wants cheaper options for workloads that don’t require the most expensive frontier models.
