In the drama surrounding Open AI, the Microsoft boss was able to calm the markets by hiring Sam Altman. But the next problem is already obvious.
Satya Nadella is trying to calm the chaos surrounding Open AI.
Carlos Barria / Reuters
One remains calm – at least on the outside. After Microsoft boss Satya Nadella calmed the markets on Monday night by announcing the hiring of the deposed Open AI boss Sam Altman, he went on the (media) offensive in the evening.
In two TV interviews on CNBC and Bloomberg, Nadella, smiling indulgently, tried to allay concerns from customers and investors. The chaos at the leading artificial intelligence (AI) startup, Open AI, hasn’t actually changed anything, said Nadella, whose Microsoft Group is the largest investor in Open AI. He is “focused on our customers” and the partnership with Altman and Open AI will continue to exist.
The “adults in the room” have taken over
After the past few days, many analysts see Nadella as a kind of “anchor of stability”. Dan Ives, an analyst at the financial firm Wedbush, called the events at Open AI, in which the board of directors unexpectedly removed CEO Altman on Friday, an “embarrassing circus performance.” Only with Nadella’s intervention did the “adults in the room take over”. Microsoft shares closed Monday up two percent at an all-time high of $377.44.
In fact, at first glance, Nadella has landed a coup for Microsoft: By hiring Altman, the company is no longer dependent on a largely independent startup, but can bring the expertise of Altman and his team directly in-house.
Nadella also emphasized that Microsoft remains the “most innovative technology company” globally. The leading AI models could have been developed internally, but they consciously decided to partner with Open AI. At this point it is clear that “something has to change in the company’s management,” said Nadella. Microsoft is having “a good dialogue” with the Open AI board of directors about this.
It remains unclear whether Altman is a Microsoft employee
When asked whether Altman was now a Microsoft employee and was taking his employees with him, Nadella responded evasively. “This is the decision of the Open AI board of directors, management and employees.” The partnership with Open AI “of course depends on whether people stay with Open AI or come to Microsoft.” He is open to both options.
There is a report from the usually well-informed portal “The Verge” on Monday evening that Altman and the chairman of the board of directors and Altman confidant Greg Brockman, who also left, were still trying to return to Open AI – if the remaining council members resign.
On Monday, chief scientist Ilya Sutskever, who fired Altman as a board member on Friday and spoke out against his return on Sunday, said on the X platform (formerly Twitter) that he “deeply” regretted his action: “I never intended To harm Open AI.” Sutskever also signed an open letter from more than 730 of Open AI’s 770 employees – 95 percent of the workforce – calling on the council to resign and threatening to work for Altman and Microsoft.
Is the board of directors resigning?
Is that conceivable? An Altman confidant told Handelsblatt that such a step was anything but impossible. A Microsoft insider told the same newspaper on Monday that it was possible that Nadella’s announcement before the market open that he would hire Altman was intended to relieve pressure.
“Maybe Altman will be parked for a short time so that he doesn’t do anything stupid and run off to the competition,” said the insider. After that, everything is possible – including that he returns as boss, runs an independent company or that Microsoft even takes over the for-profit Open AI unit, if that is legally possible.
Microsoft boss Nadella knows that the competition is closely following the chaos surrounding Open AI, in which Microsoft had invested $13 billion. Next week, cloud competitor Amazon Web Services (AWS) is holding its developer conference. One of the goals: attract new AI talent to AWS.
And Salesforce boss Marc Benioff advertised on Platform X on Monday that he would be hired immediately. “Salesforce is offering full cash and equity compensation to any Open AI researcher who has submitted their resignation,” Benioff wrote. “Send me your CV.” Google is also said to be interested.
Salesforce will match any OpenAI researcher who has tendered their resignation full cash & equity OTE to immediately join our Salesforce Einstein Trusted AI research team under Silvio Savarese. Send me your cv directly to [email protected]. Einstein is the most successful… pic.twitter.com/1RXoc9ekeo
— Marc Benioff (@Benioff) November 20, 2023
Experts should not leave for the competition
According to analysts, Nadella should definitely prevent experts from leaving for the competition. Microsoft’s stock market value has increased by over $980 billion since announcing its last Open AI investment in January. Stifel analyst Brad Reback wrote on Monday that “this is the first time in over two decades that (Microsoft) is not lagging behind an emerging technology trend.” Microsoft’s customers must therefore be able to rely on the Open AI drama not disrupting Microsoft’s AI projects.
According to Brendan Burke of the analysis house Pitchbook, the latest model of Open AI, GPT-5, is delayed again due to the chaos. Microsoft’s internal AI research laboratory lags behind the competition and, even with new talent, “will not immediately become as effective as Open AI.” At the same time, competitors have invested in over twenty competing AI startups, including ten with billion-dollar valuations. These now have “a window of opportunity to achieve fundamental breakthroughs”.
In fact, Nadella has strongly aligned the future of the group with Open AI. At the end of January, he announced multi-year investments of around $10 billion.
As the risks increase, so does the pressure
On Monday, the pressure on the remaining board members critical of Altman – the CEO of the platform Quora, Adam D’Angelo, the ex-head of GeoSim Systems, Tasha McCauley, and Helen Toner from the Center for Security and Emerging Technology in Georgetown – continued to grow elevated. Open AI employees explained on the Internet that they are currently ensuring the “stability and security” of the systems.
Given the open power struggle, the short-term risks for Microsoft are immense. Nadella has integrated Open AI’s AI models into almost all of the company’s products. The assistant called “Microsoft 365 Copilot” supports programs such as Word, Powerpoint or Excel. Microsoft charges a surcharge of $30 a month for this. If Open AI collapses or if the company’s AI interfaces become error-prone, this would directly damage Microsoft’s products.
A note to @OpenAI developers 🫶:
I wanted to express my appreciation for all the warm, thoughtful, and supportive messages I got and I’ve seen posted across the community.
Despite a moment of uncertainty, our commitment to developers remained steadfast.
In the meantime,…
— Logan.GPT (@OfficialLoganK) November 20, 2023
Microsoft has also initiated huge new investments based on the Open AI partnership. Chief Financial Officer Amy Hood told analysts in July that there would be significant increases in spending on data centers. “We assume that investments in our technical infrastructure will increase in the second half of 2023 and continue to increase in 2024,” Hood said at the time. Semiconductor specialist Dylan Patel estimated spending at more than $50 billion a year. “Microsoft is currently undertaking the largest infrastructure expansion humanity has ever seen,” he wrote.
This infrastructure is partly tailored directly to the requirements of Open AI. Microsoft can generally adapt it to new projects and thus also help Altman and his team. In the short term, however, a collapse of Open AI could cause significant damage to Microsoft – in terms of its share price and customer trust.
Altman said on Monday on X that his top priority remains “ensuring that Open AI continues to thrive.” He and Microsoft have committed themselves to “fully guaranteeing the continuity of operations”.