Do you have a source for that backtracking about AI? I think they did not mention that explicitly. Instead they were talking about unrelated improvements. The CEO is still in denial about AI bloat. He seems unable to comprehend that people don't like to be force fed AI everywhere across the OS.
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I think that Satya Nadella and a lot of other CEO types genuinely believe in AI, as misguided as it seems. This is more about who they choose to listen too than having an actual understanding of the technology and its limits. And probably some FOMO sprinkled on top.
Sam Altman knows what's up though and so does Jensen Huang. In this gold rush one is peddling the fake gold and the other is selling the shovels.