Against the odds, Microsoft emerges as the big winner from the OpenAI mess

Microsoft CEO Satya Nadella has turned a potential disaster for the software company into a significant victory

Microsoft emerged on Monday as the big winner of the upheaval at OpenAI, hiring ousted CEO Sam Altman and other key staff of the start-up to avert a potential flight to rivals and help deepen its lead in the artificial intelligence race.

The turmoil at OpenAI since Friday had raised fears about the fallout for Microsoft, which has pumped in billions of dollars and uses the pioneer’s technology for most of its AI offerings.

The move ensured “the golden child of AI” will stay with Microsoft, analysts said, as the company competes with Google to dominate the nascent industry.

Microsoft’s shares rose about 1.5%, with the company on track to add nearly US$30-billion to its market value at current levels. That was nearly equal to the valuation OpenAI commanded in its last fundraise.

“If Microsoft lost Altman, he could have gone to Amazon, Google, Apple or a host of other tech companies,” said Wedbush Securities analyst Dan Ives. “Instead, he is safely in Microsoft’s HQ now. We view Microsoft now even in a stronger position with Altman and Brockman at Microsoft running AI.”

Altman will lead a new research team at the software giant following his surprise ouster by OpenAI that shocked the tech industry. He will be joined by Greg Brockman, another OpenAI co-founder, as well as other researchers including Szymon Sidor.

Analysts also said more employees could jump ship to Microsoft as the turmoil could impact what was expected to be a share sale at an $86-billion valuation by the start-up, potentially affecting staff payouts at OpenAI.

‘Nothing without its people’

“The OpenAI for-profit subsidiary was about to conduct a secondary at a $80-billion+ valuation. These ‘Profit Participation Units’ were going to be worth $10-million+ for key employees. Suffice it to say this is not going to happen now,” chip industry newsletter SemiAnalysis said.

Several employees of the start-up, including former interim CEO Mira Murati, said in posts on the X social media platform on Monday that “OpenAI is nothing without its people”.

At Microsoft, the Altman-led team will also likely have more access to the computing power necessary as the company is the second biggest US cloud player and has committed to spending billions to expand its data centre capacity.

Read: Why OpenAI’s board fired Sam Altman

“If the team went down the start-up path, they would have had to spend significant time rebuilding GPT-4. Instead, at Microsoft they will have access to much of the IP they require for future products,” SemiAnalysis said.  — Aditya Soni and Akash Sriram, (c) 2023 Reuters

Get breaking news alerts from TechCentral on WhatsApp