As artificial intelligence continues to redefine the tech industry, Microsoft CEO Satya Nadella is calling for a more grounded and socially responsible approach. Speaking at Y Combinator’s AI Startup School, Nadella emphasized that AI must go beyond flashy demonstrations and instead focus on solving real-world problems that impact everyday lives.

“The real test of AI,” Nadella said, “is whether it can help solve everyday problems — like making healthcare, education, and paperwork faster and more efficient.”

This call for pragmatism arrives at a pivotal moment for Microsoft. The tech giant recently laid off more than 6,000 employees, citing AI-driven organisational restructuring. While the company maintains that the changes are essential to thrive in an increasingly competitive and evolving marketplace, the human cost of such transformations cannot be ignored.

In his address, Nadella didn’t shy away from the deeper implications of the AI boom — particularly its environmental impact. Highlighting the substantial energy demands of large-scale AI systems, he warned that the industry must be ready to justify its consumption.

“If you’re going to use energy, you better have social permission to use it,” he said. “We just can’t consume energy unless we are creating social and economic value.”

According to a 2023 report by Clean View Energy, Microsoft consumed nearly 24 terawatt-hours of electricity in a single year — an amount comparable to that used by a small nation. With AI infrastructure now a central pillar of its business strategy, the pressure is on Microsoft to ensure that this power usage yields tangible benefits.

Nadella offered the American healthcare system as a key example of where AI could make a real difference. He pointed to hospital discharges as a process that could be vastly improved with AI-driven solutions, reducing delays, cutting costs, and streamlining administration. “A simple thing like hospital discharge — if done with an AI model — can save time, money, and energy,” he noted.

Despite this optimism, the transformation is not without its difficulties. The recent job cuts reflect broader corporate changes as Microsoft prioritizes AI and cloud capabilities. Sources now indicate that another round of layoffs could be on the horizon — this time affecting the Xbox gaming division — as the company closes out its financial year.

If confirmed, this would mark the fourth major round of job reductions at Microsoft within just 18 months. The restructuring follows its massive $69 billion acquisition of Activision Blizzard in 2023 and a renewed focus on profitability, AI, and gaming.

Nadella’s message is clear: AI’s future must be tied to meaningful, inclusive progress. For companies like Microsoft, the challenge lies in navigating the fine line between innovation and responsibility. As AI reshapes industries, the tech world must ensure its promises justify its costs — both human and environmental.