Claude is too expensive: Microsoft could integrate Chinese AI DeepSeek into Copilot

Agents using Copilot Cowork consume far more computing power than a conventional chatbot: each delegated task chains multiple model calls, and the most active users launch hundreds per week, driving up inference costs much faster than in an ordinary conversation. Copilot Cowork, launched worldwide on June 16, 2026, has specifically moved to usage-based billing so that businesses pay for what they consume rather than a fixed fee. The mechanical consequence of this model is that Microsoft now needs lower-cost options for the most intensive use cases. This is the context in which the DeepSeek V4 option emerged internally. The model would be self-hosted on Azure infrastructure, with users’ data remaining in Microsoft’s cloud without being routed to China-based servers: the architecture would resemble a service arrangement in which the contractor provides the recipe but does not have access to the client’s ingredients.

A low-cost model, yes, but which one?

The answer lies first and foremost in cost. DeepSeek V4 has a significantly lower inference cost than US models, at the price of a possible trade-off in raw capability, latency, or safeguard maturity—a compromise Microsoft says it has addressed by fine-tuning the model and adding its own safeguards. DeepSeek is not the only possibility: Microsoft is also preparing its own in-house model, called Cowork 1, expected in the coming weeks for lower-cost everyday tasks.For European businesses, sovereign alternatives such as Mistral Vibe with its Work mode are coming into the equation, especially since the AI Act adds a constraint: deployment in the European market requires models that comply with the transparency obligations imposed on general-purpose AI, and a model trained outside the European regulatory framework does not make this compliance work any easier.

Trump is watching, and he doesn't like it

The U.S. administration views China-origin AI as a politically sensitive issue. Several federal agencies have already restricted the use of DeepSeek on their devices, and the idea of a major cloud provider hosting a Chinese model at the heart of an enterprise tool is, to say the least, politically incendiary in Washington. Microsoft, which holds substantial federal contracts and already has a complicated relationship with Washington on certain technology issues, is navigating a delicate path: integrating DeepSeek would allow it to reduce its operating costs for Copilot Cowork, but would expose it to political criticism it would much rather avoid in the current context.

For the time being, the integration remains at the internal consideration stage, the option having been mentioned without being confirmed as a settled decision. What is established, however, is that pressure on inference costs will not disappear as Copilot Cowork scales up, and that Microsoft will have to respond one way or another.DeepSeek, Cowork 1, or another open-source model: the Chinese option is on the table. It isn’t the only one, and it certainly isn’t the simplest.

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Source: Axios