Bring your own Data to Azure OpenAI: Step-by-Step Guide

JamesPetra Thank you for your questions! Sorry if it takes me some time to respond as I have to research a bit.

 If I understand correctly retrieval from AI Search (basically RAG extracting) and passing x results from it to OpenAI is happening directly on Azure servers all is integrated, is this correct?

I believe that what you have in the code is this architecture Search and query an enterprise knowledge base by using Azure OpenAI or Azure Cognitive Search - Azure Architecture Center | Microsoft Learn. See the architecture image below and the link describes the details of the architecture and other approaches that maybe used.

Note that Azure Open AI here is used to create vector embeddings for the Azure AI search Embeddings are numerical representations of concepts converted to number sequences, which make it easy for computers to understand the relationships between those concepts. Azure OpenAI Service embeddings - Azure OpenAI - embeddings and cosine similarity | Microsoft Learn

Why?
AI Search doesn’t host vectorization models, so one of your challenges is creating embeddings for query inputs and outputs. Generate embeddings - Azure AI Search | Microsoft Learn

That's how everything works! Hope it's clearer to you now..

Unfortunately, I have not had the opportunity to experiment with both services on the same data but I think that both will have pros and cons which you will have to explore yourself.