SEATTLE, May 19 (Reuters) - Microsoft ( MSFT ) hosts its annual

software developer conference in Seattle on Monday, drawing

thousands of coders looking to turn the past years of

investments into artificial intelligence into profitable

products and services for consumers and businesses.

The Redmond, Washington-based software giant, which is an

investor and deep strategic partner with ChatGPT creator OpenAI,

and has already spent $64 billion this year, much of it on data

centers needed for AI-based services such as Copilot used in its

popular Microsoft ( MSFT ) 365 applications.

But there are signs that Microsoft ( MSFT ) -- whose shares are up more

than 30% this year, defying a broader Nasdaq decline -- is

reworking its relationship with OpenAI and seeking to become a

neutral arms dealer in the AI race.

Earlier this year, Microsoft ( MSFT ) allowed OpenAI to branch out and

work with Oracle on the massive "Stargate" data center project

in Texas.

Meanwhile, CEO Satya Nadella has argued the company can get

expenses down, saying that once it settles on an algorithm and

begins to optimize it, Microsoft ( MSFT ) can obtain 10 times better

performance for the same computing costs.

Demand for AI services in Microsoft's ( MSFT ) Azure cloud computing is

also continuing to grow.

Thomas Blakey, an equity analyst with Cantor Fitzgerald,

said that the company is increasingly keeping revenue-generating

AI services inside its own data centers, where it can continue

to tweak them for better cost.

It shifting to only using outside data center services such as

CoreWeave ( CRWV ), which is known as a "neocloud" that focuses on

offering AI chips from Nvidia ( NVDA ), when Microsoft ( MSFT ) needs short bursts

of extra computing power for specific projects.

"If they have to flex up in some way, they've been

consistently saying that they're going to shift away from buying

more data centers and dirt and cement and they're going to leave

that to the neoclouds," Blakey told Reuters.