OpenAI’s futures hangs in the balance Tuesday as it attempts to quell a staff rebellion linked to the departure of founder and CEO Sam Altman and reports that investors are looking to remove the board following its disastrous handling of the AI group’s leadership transition.
Around 700 of OpenAI’s 770 employees have signed a letter indicating they will quit the San Francisco-based group and ChatGPT creator if Altman isn’t brought back as CEO and the four-person board, lead by chief scientist Ilya Sutskever, is not removed from its duties.
The remaining three board members include Quora CEO Adam D’Angelo, GeoSim Systems CEO Tash McCauely and Helen Toner, who runs research grants from Georgetown’s Center for Security and Emerging Technology.
The revolt follows a dizzying chain of events that began late Friday with the surprise ouster of Altman, 38, and his close associate, chairman Greg Brockman, for reasons that the OpenAI board has yet to articulate some four days later.
Microsoft (MSFT) – Get Free Report CEO Satya Nadella, meanwhile, has said he will hire Altman and Brockman to lead its new AI research team, adding during a CNBC interview late Monday that the tech giant, which owns 49% of OpenAI, is happy to have staff join the AI team in Redmond, Washington or remain in San Francisco.
Salesforce CRM CEO Marc Benioff, meanwhile, issued an open invitation for OpenAI research staff to join the cloud and client software specialists, with analysts suggesting that AI demand could guarantee placements at Google (GOOGL) – Get Free Report, Amazon (AMZN) – Get Free Report and Meta Platforms (META) – Get Free Report for the group’s key employees.
OpenAI’s current management team, which is lead by former Amazon Twitch executive Emmett Shear, was left scrambling to both retain the group’s top talent and broker a deal with Microsoft that ensures its near-term survival.
Anna Makanju, OpenAI’s vice president of global affairs, told staff that the management team is in “intense discussions” with Altman, Shear and the OpenAI board as of late Monday.
In any event, it certainly seems as if Microsoft will emerge as the ultimate victor, either by assuming a greater amount of influence on the group or bringing its leadership team and key staff to Redmond.
“Irrespective of where Sam is, he’s working with Microsoft,” Nadella told Bloomberg Television late Monday. “We are leading in this next generation of AI technologies and we continue to be committed to OpenAI and to Sam and Greg and the team irrespective of where they are.”
Nadella has insisted, however, that Altman’s return to OpenAI would need to come with both changes to its current board structure and an overhaul of the group’s existing corporate governance.
“If the board resigns and Altman, Brockman, and others go back to OpenAI we would expect the next move would be for Microsoft to have a board seat and take more control from a governance perspective,” said Wedbush analyst Dan Ives, who carries an ‘outperform’ rating with a $425 price target on Microsoft stock.
“We view Microsoft now even in a stronger position from an AI perspective with Altman and Brockman at Microsoft running AI or if they go back to OpenAI (assuming the board leaves) and hit the reset button with Nadella/Altman at the helm,” he added.
Bloomberg also reported that Thrive Capital, which was set to lead a tender offer for some OpenAI shares held by staff, which would peg the group’s overall value at between $85 billion and $90 billion, is balking at the prospect unless Altman’s future is made clear.
Microsoft has touted the potential of ChatGPT, a tool that uses human language to process instructions, to close the gap on market leader Google, the eponymous lead product of parent company Alphabet.
Investors are betting that AI adoption will help Microsoft — which generated just $3.2 billion in search revenue last year — challenge the market dominance of Google, which churned around $43 billion.
In a further demonstration of its AI ambitions, Microsoft said last week that it will start producing its own central processing units in an effort to diversify its dependence from AI chip leader Nvidia NVDA. The move is seen as likely to improve long-term profit margins as the software giant seeks to make it easier to build GPT and AI functionality into its product base.
“While the turnover in OpenAI leadership to us suggests risk around OpenAI’s prospects and pace of innovation and around the Microsoft/OpenAI relationship, those concerns regarding Microsoft are somewhat offset by the announced move of Altman and Brockman to Microsoft,” said KeyBanc Capital Markets analyst Michael Turits.
“We continue to view Microsoft as being one of the dominant beneficiaries of Generative AI both at the infrastructure level, where the company recently reported >3% of Azure’s first quarter revenue being driven by AI, and across its consumer and enterprise applications with its expansive Co-pilot offerings,” he added.
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