Satya Nadella has reportedly urged staff to focus on the future, warning AI could undo Microsoft's dominance as layoffs continue

Artificial intelligence could make some of Microsoft's biggest businesses obsolete, CEO Satya Nadella has warned, according to media reports. 

Speaking at a closed town hall meeting last week, he reportedly told employees he is "haunted" by the fate of Digital Equipment Corporation, once a leader which collapsed after failing to adapt, according to the Verge.

Microsoft has been among the most aggressive US tech companies in adopting AI, investing billions in infrastructure and deepening its partnership with OpenAI. The company is embedding generative tools into Windows, Office, and Azure while cutting thousands of jobs as part of restructuring.

"Some of the biggest businesses we've built might not be as relevant going forward," Nadella said, the outlet reported. He noted that "some of the people who contributed to Windows NT came from a DEC lab that was laid off," referring to the 1993 operating system that helped define Microsoft's dominance.

Microsoft has cut more than 15,000 jobs this year, unsettling staff who fear dismissals and replacement by AI as the company shifts resources into technology. Some workers reportedly said they have noticed a "major culture shift" marked by rigidity and anxiety.

Nadella told staff that "all the categories that we may have even loved for 40 years may not matter," saying the company will only remain valuable "if we build what's secular in terms of the expectation, instead of being in love with whatever we've built in the past."

In August, Elon Musk added to the pressure, saying "in principle... it should be possible to simulate [Microsoft] entirely with AI," suggesting the company's software could be replicated by artificial intelligence.

Despite reducing headcount, Microsoft is spending heavily on AI. The company has pledged around $80 billion to expand data centers supporting AI, outpacing rivals including Google and Meta. It also maintains a multi-billion-dollar partnership with OpenAI, though tensions have emerged as OpenAI seeks new terms and more capacity. The two companies signed a "non-binding memorandum of understanding" this month as they negotiate a new agreement.

Other US tech giants are also pouring money into AI. Meta has boosted capital expenditures and expanded its AI infrastructure, viewing AI as central to its future.