Microsoft has bought artificial intelligence-powered speech recognition firm Nuance for $20 billion, the tech giant’s second largest acquisition ever.

It was revealed on Monday that Microsoft would be purchasing Nuance, a leading voice recognition firm which was instrumental in developing Apple’s Siri digital assistant, for $US16 billion.

Microsoft has been very active in recent years in purchasing other tech companies to expand its offering and grow its dominance in key sectors, with the company making more than 100 acquisitions in the last four years.

It’s the second largest acquisition Microsoft has undertaken, behind its purchasing of LinkedIn for more than $US26 billion in 2016.

Nuance is a pioneering company in speech-based artificial intelligence technologies.

Since working on Siri, the company has pivoted to focus on healthcare, offering a range of tools for recognising and transcribing speech during doctor’s appointments, customer service calls and voicemails.

Its technology will now be used to augment Microsoft’s cloud products for healthcare, which it launched last year, Microsoft CEO Satya Nadella told shareholders on Monday.

“This acquisition brings our technology directly into the physician and patient loop, which is central to all healthcare delivery,” Nadella said.

“The acquisition will also expand our leadership in cross-industry enterprise artificial intelligence and biometric security.”

Microsoft previously partnered with Nuance in 2019 to deliver automated clinical administrative work including documentation.

Nuance CEO Mark Benjamin will remain at the tech company and will report directly to Scott Guthrie, the Microsoft executive in charge of the company’s cloud and artificial intelligence business.

Nuance has refocused on healthcare and enterprise AI and there has been accelerated demand for these segments, Benjamin said.

“To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care,” Benjamin said.

“The path forward is clearly with Microsoft - who brings intelligent cloud-based services at scale and who shares our passion for the ways technology can make a difference.

“At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey.”

Microsoft will pay $US56 per Nuance share, a 23 per cent premium on the company’s closing price last week.

Following the announcement, shares in Nuance rose by nearly the same percentage.

Voice recognition tech will be key to Microsoft’s growth plans, according to ABI research and artificial intelligence and machine learning principal analyst Jye Su.

“This is a recognition from Microsoft on the value of conversational artificial intelligence in its future roadmap,” Su said.

“The acquisition of Nuance Communications will elevate Microsoft’s capabilities and allow Microsoft to develop both consumer and enterprise-focused conversational artificial intelligence solutions.”

The company is also reportedly in talks to buy gaming-focused chat service Discord for $US10 billion, and is “in the running” to land this deal.

Microsoft attempted to buy social media giant TikTok last year amid a political storm and geopolitical tensions, but its offer was rejected by the China-based company.

Microsoft has also recently become more involved with Australian politics, throwing its support behind the news media bargaining code which its rivals Google and Facebook had rallied against.

The tech giant said it would happily be subject to the code, and attempted to position its Bing service as an alternative to Google search engine if the company had followed through on its threat to withdraw from Australia.