Microsoft is partnering with Elon Musk's $1 billion AI research company to help it battle Amazon and Google

Microsoft has announced a new partnership with OpenAI, the $1 billion artificial intelligence research nonprofit cofounded by Tesla CEO Elon Musk and Y Combinator President Sam Altman.

Under the terms of the partnership, OpenAI will use the Microsoft Azure cloud computing service as the "preferred" place to do its AI experiments. In return, Microsoft gets increased access to OpenAI's deep bench of robotics and experts, making Azure a better place for building AI-powered software.

"You want to get a good feedback loop going," says Microsoft Executive VP of Cloud and Enterprise Scott Guthrie. "That helps you ultimately build a better platform."

Artificial intelligence is going to be a big point of competition between Microsoft Azure, the leading Amazon Web Services, and the relative upstart Google Cloud over the months and years to come. As Guthrie says, "any application is ultimately going to weave in AI," and Microsoft wants to be the company that helps developers do the weaving.

That's where the OpenAI partnership becomes so important, Guthrie says.

Because we're still in the earliest days of artificial intelligence, he says, the biggest challenge is figuring out what exactly can be done with artificial intelligence. Guthrie calls this "understanding the art of the possible."

With OpenAI, a research institution focused largely on just that, it's a natural collaboration as they work to "jointly build an even richer ecosystem around artificial intelligence" and "learn as fast as possible," Guthrie says.

Guthrie highlights the fact that Microsoft customers like ThyssenKrupp and Uber are already working with Azure and its artificial intelligence capabilities to power things like fixing elevators before they actually break or making sure your driver is actually your driver.

Combine that with Microsoft's expertise in serving large business customers and helping them build applications that can securely handle large amounts of data, and Guthrie believes Microsoft really stands out from the pack.

"Combined, they help make Azure an even more differentiated platform," Guthrie says.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.