If Sam Altman can’t be convinced to return to OpenAI, Microsoft is in trouble.
As soon as Altman’s ouster from the company he co-founded shocked the tech industry on Friday, VCs were, no doubt, formulating plans to write checks for his next venture, as the memes on X joked.
Prominent VC Vinod Khosla said as much on X. “To be clear, Khosla Ventures wants @sama back at @OpenAI but will back him in whatever he does next,” he posted.
Should that next venture be a generative AI startup that competes with OpenAI and has no qualms about pursuing commercial success (a likely choice!), Altman would also have no trouble poaching the brightest minds from OpenAI. His cofounder, Greg Brockman, immediately quit in protest of Altman’s removal, as did three senior researchers.
More staffers were threatening to resign if Altman wasn’t reinstated, the Verge reported. And Altman called to them with a post on X of his appreciation, “i love the openai team so much.”
Does he love them enough to hire them for a new venture that would be swimming in venture cash? As that’s how so many startups launch— by hiring people from the last company — I’m going to say yes.
All of which means that the biggest loser if Altman can’t be convinced to return isn’t Altman. And it isn’t OpenAI employees.
It’s Microsoft and CEO Satya Nadella.
“OpenAI is like Mahomes to the Chiefs. Nadella recognizes this and losing Sam is not an option. This OpenAI board is way over its head and the failed coup is now backfiring,” investor Dan Ives, an analyst at Webush, told Business Insider.
Microsoft has invested a reported $10+ billion dollars and owns a sizeable stake — some reports say as much as 49% — in a for-profit unit run by the non-profit OpenAI. (Although Microsoft has never publicly confirmed the size of that stake.)
The OpenAI non-profit was run by a six-person governing board who owned no equity and included Altman and Brockman. So a simple majority vote was all it took to fire Altman and install CTO Mira Murati as interim CEO.
OpenAI only gave Microsoft a few minutes advance warning before announcing Altman’s ouster, sources told Business Insider. The company has, publicly at least, stood by the board’s decision. “We have a long-term agreement with OpenAI with full access to everything we need to deliver on our innovation agenda and an exciting product roadmap; and remain committed to our partnership, and to Mira and the team,” Microsoft CEO Satya Nadella said in a statement.
Until Friday, Microsoft’s deal with OpenAI was a major coup for Nadella, giving Microsoft deep access to the technology at the center of AI, while preventing its competitors from doing the same.
But should Altman refuse to return and instead form a new AI startup, he can certainly easily fill it with the people who know the secrets of OpenAI technology. And he’s also likely to seek another cloud investor/partner. Generative AI needs massive, specialized compute power to perform, especially to perform for millions of customers. Google or Amazon would almost certainly try to make Altman a deal he couldn’t refuse.
It would be much safer for Nadella to pressure OpenAI into getting Altman to come back.
“The biggest worry is the Altman sweepstakes end up in the Google or Amazon backyard which would be a nightmare for Microsoft,” Ives wrote in a research note.
But it’s not just the money invested, and the gains of that investment, that would be lost for Microsoft.
Microsoft has been baking OpenAI technology into pretty much all of its major products, and beating its rivals to market.
Earlier this month the company made over 100 announcements of integrations with OpenAI tech across Microsoft’s AI tools, AI models, tools in its cloud, the company told Business Insider. It put Copilot — its chat assistant based on GPT — everywhere.
But Microsoft has also been making cuts, or outright winding down, various other internal homegrown AI projects to lean into OpenAI tech, sources have told Business Insider.
It shut down various “industrial metaverse” projects and laid off staff, as BI previously reported. That homegrown “industrial metaverse” had been a key AI strategy before ChatGPT took off like it did this year.
And that means that if OpenAI up and implodes, Microsoft no longer has a fast backup plan.
On the other hand, various reports — and just plain common sense — say that Altman won’t come back unless the management structure of OpenAI is altered, and the four board members who fired him resign.
Should that happen, Microsoft could actually wind up in a better position to influence this all-important company that seems to need badly need the guidance, probably with a board seat.
“The growing consensus from Silicon Valley and Wall Street is that the days for this four-person board are numbered and Altman will be back at OpenAI and ultimately Microsoft in an even stronger position to control OpenAI’s strategic direction,” Ives said.
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