Washington DC
New York
Toronto
Distribution: (800) 510 9863
Press ID
Thursday, June 13, 2024

In hiring Sam Altman, analysts say Microsoft ‘pulled off a coup’ of its own

Sam Altman’s dramatic ouster as OpenAI’s chief executive and the corporate musical chairs that ensued have raised a slew of questions about the future of artificial intelligence. But many analysts say the early win goes to Microsoft, whose hiring of Altman — and potentially many of his loyalists — will allow them to work together without the constraints of OpenAI’s non-profit board.

Microsoft CEO Satya Nadella “just pulled off a coup of his own,” Fred Havemeyer, Macquarie senior enterprise software analyst, said in a note to investors on Monday.

Early Monday, Nadella announced that Altman — whose leadership at OpenAI turned the company into a Silicon Valley force — had joined Microsoft, along with Greg Brockman, the former president of OpenAI, who quit in solidarity with Altman. It was the latest twist in a weekend-long drama that began Friday with an announcement from OpenAI’s board that Altman had been pushed out, surprising observers and rocking the industry.

Microsoft has worked closely with OpenAI, using its ChatGPT technology to power a chatbot featured on its Bing search engine. In January, Microsoft confirmed that it had invested $10 billion in OpenAI, which was founded as a nonprofit but evolved to a developer of consumer products.

On Monday, OpenAI’s fate remained uncertain as hundreds of employees signed a letter threating to quit and join Microsoft unless Altman was reappointed and the current board resigns. The board had pushed out Altman because he was not “consistently candid” with some of its members.

Working with Altman and those loyal to him without the oversight of a nonprofit board of directors may be an even more promising development for Microsoft than its initial OpenAI investment, said Adam Struck, managing partner of venture capital firm Struck Capital.

“Microsoft is in the driver’s seat, because they’ve essentially acquired all of OpenAI’s value for essentially zero … Now, they’ve got Sam and now they’re not beholden to a 501c3,” said Struck, referencing a nonprofit organization. “What’s scary now though, is Sam was obviously removed for a reason. He’s not going to have no limitations of Microsoft.”

Analysts widely predicted that many OpenAI employees loyal to Altman would follow him to Microsoft.

“If many OpenAI employees choose to migrate to Microsoft to join Mr. Altman and Mr. Brockman, then not only would Microsoft hold a license to OpenAI’s IP up to AGI, but Microsoft would also be effectively acquiring OpenAI’s core differentiation — its ambitious and experienced technical talent,” Havemeyer added.

The shakeup comes as Silicon Valley’s largest tech companies vie to dominate the emerging AI market. Atlman could have gone to any number of large tech companies, including Amazon, Google or Apple, wrote Dan Ives, a Wedbush analyst, in a Monday note. “Instead he is safely in Microsoft’s HQ now leading the company key AI efforts which we expect many key scientists and developers to leave OpenAI and head directly to Microsoft.”

Ives compared Microsoft’s hiring of Altman to a “World Series of Poker move for the ages,” and said the company’s already strong AI position is now stronger.

The reshuffling in the industry will not happen instantly, Deb Raji, an AI researcher and fellow at Mozilla, said in a Monday post on X, formerly known as Twitter. Altman’s jumping to Microsoft could effectively result in the six-month development pause that some AI leaders sought this spring.

“Whatever happens at Microsoft, it will take at least 6 months for onboarding and ramp up — and on the Open AI side, it will take at least that long or more to rehire and recover,” Raji wrote.

Discussion about this post

BROWSE BY CATEGORIES

Welcome Back!

Login to your account below

Retrieve your password

Please enter your username or email address to reset your password.