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Yesterday, Mistral AI, a Paris-based AI startup working on foundational models, announced a new large language model that could rival OpenAI’s GPT-4, a chat assistant and a distribution partnership with Microsoft yesterday. But Microsoft and Mistral AI buried the news — or at least an important part.

As part of the partnership, Microsoft is investing €15 million in the French startup ($16.3 million at today’s exchange rate). Microsoft says that this investment will convert into equity in Mistral’s next funding round.

It means that the valuation of Mistral AI isn’t changing following this investment. Microsoft’s percentage stake in the AI startup will also depend on the valuation of the next funding round.

Mistral AI reached a valuation of about $2 billion following its most recent funding round in December 2023. At the time, the company raised €385 million (around $415 million) with Andreessen Horowitz (a16z) leading the investment round. The company had previously raised a $112 million seed round just a few weeks after its inception.

If Mistral AI can at least maintain its valuation during its next funding round, it means that Microsoft will own less than 1% in equity in the French AI company.

Yesterday, Mistral AI unveiled Mistral Large, its flagship large language model that has been designed to rival other top-tier models, such as GPT-4 and Claude 2. Unlike previous Mistral AI releases, Mistral Large isn’t open source. Developers can access the model through Mistral’s own API platform.

Mistral AI and Microsoft also signed a distribution partnership deal for Azure. As a result, Mistral AI will likely attract more customers with this new distribution channel.

It also means that Azure customers can access Mistral’s models through Azure’s model catalog. Customers who want to remain in the Microsoft ecosystem have another option in addition to OpenAI’s models. Meta’s Llama models are also available on Azure.

With this investment, Microsoft is now an investor in OpenAI’s capped profit subsidiary and Mistral AI. Microsoft’s relationship with OpenAI is under scrutiny from EU and UK regulators.

This new investment will likely attract the attention of the European Commission. That’s why Microsoft didn’t make a big deal about it. As for Mistral AI, the so-called European AI champion looks more and more like its American competitors with a closed-source approach and a long list of American backers.