OpenAI: What comes next as Sam Altman joins Microsoft?

US technology company Microsoft is poised to strengthen its position in generative artificial intelligence as it hires Sam Altman , former chief executive of ChatGPT's parent company OpenAI, to lead a new in-house AI team, industry analysts said. The move will diversify Microsoft’s generative AI portfolio and reduce its reliance on a single company, OpenAI , a strategy that competitors such as Amazon Web Services are following, they said. Microsoft chief executive and chairman Satya Nadella on Monday announced Mr Altman and former OpenAI president Greg Brockman are to join the Washington state-based company, following unsuccessful efforts to reinstate him as chief executive of OpenAI . “We look forward to moving quickly to provide them [ Mr Altman and Mr Brockman] with the resources needed for their success,” Mr Nadella wrote on X, formerly Twitter. The decision ended speculation that Mr Altman might return to OpenAI after his turbulent ousting from the generative AI start-up last week. “The move is certainly like Christmas coming early for them [Microsoft] and with a CEO [like Mr Altman], who built the company [OpenAI] from nothing to over a billion-dollar valuation, the future of Microsoft looks bright,” said Naeem Aslam, chief investment officer at Zaye Capital Markets . “Microsoft certainly needed a person like him and all of this will positively contribute to the company's earnings and profile." Following the news, Microsoft’s stocks were trading 1.12 per cent higher at $369.85 a share in pre-market trading before surging to $376.27 at 12.09am New York time (9.08pm UAE time). The company’s market valuation stood at $2.80 trillion. Mr Nadella "pulled a master move by hiring Sam/Greg as it further boosted the company’s in-house AI capabilities”, said Yang Wang, senior analyst at Counterpoint Research . “Microsoft potentially gets a closer look ‘under the hood’, with the potential to not just develop cutting-edge AI models, but also vertically optimised AI models, infrastructure, networks and hardware. These will add tremendous economic value to Microsoft." Microsoft, the primary supporter of OpenAI with a reported commitment of $10 billion to bolster the company, has also affirmed its dedication to the California-based start-up. However, sources revealed the tech giant was caught off guard by Mr Altman's departure, receiving notification 10 minutes before OpenAI made the news public on Friday. In the meantime, OpenAI has appointed former Twitch chief executive Emmett Shear as its interim boss. Mr Shear called the offer from OpenAI a "once-in-a-lifetime opportunity" in a post on Monday. He admitted Mr Altman’s removal was “handled very badly, which has seriously damaged our trust”. But he made it clear Mr Altman was not removed for alleged safety concerns to the platform. “I checked on the reasoning behind the change. The board did not remove Sam over any specific disagreement on safety, their reasoning was completely different from that. I'm not crazy enough to take this job without board support for commercialising our awesome models,” Mr Shear wrote on X. Mr Altman expressed belief in his new team at Microsoft. “We have more unity and commitment and focus than ever before. We are all going to work together some way or other, and I am so excited. One team, one mission,” he said on X. "Satya and my top priority remains to ensure OpenAI continues to thrive ... we are committed to fully providing continuity of operations to our partners and customers." The saga is expected to intensify the global race for AI supremacy, analysts said. “It has sparked concerns about the stability of leadership in the AI industry and paved the way for the formation of new alliances,” said Vijay Valecha, chief investment officer at Century Financial. “While industry experts do not foresee any immediate disruptions to Microsoft's products or services stemming from the fallout at OpenAI, it is undeniable that Microsoft's AI strategy hinges heavily on a single company [OpenAI]. In contrast, its competitor, Amazon Web Services, has adopted a more diversified approach, partnering with multiple AI companies.” Investors might have some concerns regarding the potential impact on OpenAI users resulting from this decision as Mr Altman will work on building a strong competitor. “It seems that Sam Altman and Greg Brockman, who are to lead a team conducting AI research with Microsoft, are going to set up a rival to OpenAI … we expect that it [OpenAI] will face intensifying competition in the market, which will affect its long-term margins,” said Nigel Green, chief executive and founder of financial adviser deVere Group . “AI is already reshaping all industries and fuelling innovation … and this makes it crucial for investors to pay attention and why almost all investors need exposure to AI investments in their portfolios.” Some analysts feel the move will support the AI market. “We believe that the move will bring more positivity for consumers despite the fact Microsoft controls the lion’s share of the data and with Mr Altman, productivity enhancement will only serve consumers more positively,” Mr Aslam said. Microsoft is clearly supporting the business vision of Mr Altman, said Javier Alvarez, senior managing director at consultancy FTI Delta . “Microsoft is creating an in-house alternative to their efforts in generative AI. Who's better to lead it than the person who generated $80 billion in value in 18 months for OpenAI. “I suspect that Microsoft would have preferred to reinstate Altman but Shear’s appointment made it difficult in the short term.” In its communication last week, OpenAI was not very clear in its reasoning behind the unceremonious dismissal of Mr Altman. It said the decision followed a “deliberative review process by the board, which concluded that he [Mr Altman] was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities … the board no longer has confidence in his ability to continue leading OpenAI". OpenAI’s board of directors comprises Quora chief executive Adam D’Angelo, technology entrepreneur Tasha McCauley, the Georgetown Centre for Security and Emerging Technology’s Helen Toner and OpenAI chief scientist Ilya Sutskever. OpenAI's staff has reportedly threatened to quit and join Mr Altman at Microsoft's new AI unit unless the board resigns. OpenAI did not immediately respond to The National’s request for comment. “I don’t think consumers get impacted in the short term,” Mr Alvarez said. “In the mid-term, there will be more competition [starting by Microsoft itself] and other companies that will receive OpenAI employees who will likely leave.” The risk of a mass exodus by employees is "real … we have just seen the open letter to the board, and if they were to rejoin Sam at Microsoft’s new AI subsidiary, this would create a formidable competitor for OpenAI, with enormous financial and technical resources," Mr Wang said. Amid this turmoil, OpenAI’s future hangs in the balance and Mr Shear faces the crucial task of retaining the support of prominent investors like Thrive Capital, Khosla Ventures, and Sequoia Capital, Mr Valecha said. “The plan to sell $1 billion in employee stock which is nearing completion is now in jeopardy. Thrive Capital was poised to spearhead the tender offer that was projected to value OpenAI at a staggering $86 billion. “Microsoft now faces the delicate task of allocating resources and support between OpenAI and [Mr] Altman's new team within Microsoft." In the period leading up to his unexpected removal from OpenAI, Mr Altman was actively engaged in raising billions from major global investors for a new chip company, as per sources familiar with the situation. Mr Altman had been traveling to the Middle East to secure funding for the project known as Tigris, reported Canada's National Post newspaper. He aimed to establish a chip company centered on AI capabilities, aiming to manufacture semiconductors that would rival those produced by Nvidia, the current leader in AI task-oriented markets. Despite billion-dollar investments by tech giants like Microsoft, OpenAI seems to be governed by a board, which is “obviously not qualified to oversee a company with such a relevance and impact”, Rolf Illenberger, founder and managing director of software development company VRdirect, said. “If Microsoft can in fact or has a realistic chance of replicating a generative AI technology, that can keep up with OpenAI just by hiring its executive staff, one needs to question what’s the real technology here?”

OpenAI: What comes next as Sam Altman joins Microsoft?

The move will diversify tech giant's generative AI portfolio and reduce its reliance on a single company, analysts say