Nadella calls out AI labs like OpenAI and Anthropic for banning distillation while training on everyone else's data

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Jul 13, 2026

Microsoft CEO Satya Nadella calls out AI labs for banning distillation. Distillation is the process where smaller models learn from the outputs of larger ones. Providers like OpenAI and Anthropic ban the practice in their terms of service, targeting mainly Chinese AI companies. In a post on his blog, Microsoft CEO Satya Nadella now calls it "ironic" that these same providers train on public data supposedly under fair use, ban distillation, and learn from customer interactions. The result, Nadella says, is that economic value concentrates with the infrastructure operators instead of the companies that actually generate the knowledge.

In consuming intelligence, you are creating intelligence.

Satya Nadella