Satya Nadella says AI’s next test is real-world results

MicMicrosoft Chief Executive Satya Nadella said 2026 would be a defining year for artificial intelligence, as the technology moves beyond early experimentation toward wider adoption and practical use. He said the AI industry needs to move beyond debates over ‘slop’ and focus on whether AI tools deliver real-world value.

“As I reflect on the past year and look toward the one ahead, there’s no question 2026 will be a pivotal year for AI,” Nadella said. “Yes, another one. But this moment feels different in a few notable ways.”

In a recent blog post, Nadella said the AI industry has moved past its initial discovery phase and is now entering a period of broader diffusion. He said companies are beginning to separate what he called “spectacle” from “substance,” while also confronting questions about how AI should shape the world.

“We have a clearer sense of where the tech is headed, but also the harder and more important question of how to shape its impact on the world,” he wrote.

Nadella said AI development remains in its early stages and warned that technical capability is advancing faster than its real-world application. He described this gap as a “model overhang,” where potential outpaces practical impact.

He argued that AI should be designed as a tool to enhance human abilities rather than replace them. “What matters is not the power of any given model, but how people choose to apply it to achieve their goals,” Nadella said.

Nadella said the industry is also moving from building individual AI models to developing larger systems that combine multiple models and agents. These systems, he said, must address issues such as safety, memory, access controls and reliable use of tools to deliver value in real-world settings.

He added that companies must make careful choices about how AI is deployed, including where resources such as computing power and talent are directed. “For AI to have societal permission it must have real world eval impact,” Nadella said, describing the challenge as a broader social and technical issue.