Microsoft CEO Satya Nadella wants to calm the chaos

He remains calm, at least outwardly. After Microsoft boss Satya Nadella calmed markets on Monday night by announcing the hiring of ousted Open AI boss Sam Altman, he went on the (media) offensive in the evening.

In two television interviews on CNBC and Bloomberg, Nadella, smiling indulgently, attempted to allay the concerns of clients and investors. The chaos at leading artificial intelligence (AI) startup Open AI hasn’t really changed anything, said Nadella, whose Microsoft group is the largest investor in Open AI. It is “focused on our customers” and the partnership with Altman and Open AI will continue.

The “adults in the room” have taken over

After the last few days, many analysts see Nadella as a kind of “anchor of stability.” Dan Ives, an analyst at financial firm Wedbush, called the events at Open AI, in which the board of directors unexpectedly ousted CEO Altman on Friday, an “embarrassing circus performance.” Only with Nadella’s intervention did the “adults in the room take control.” Microsoft shares closed up two percent on Monday to an all-time high of $377.44.

In fact, at first glance, Nadella has dealt Microsoft a blow: by hiring Altman, the company is no longer dependent on a largely independent startup, but can instead bring the expertise of Altman and his team directly in-house.

Nadella also emphasized that Microsoft remains the “most innovative technology company” globally. The main AI models could have been developed in-house, but they consciously decided to partner with Open AI. At this point it is clear that “something has to change in the management of the company,” said Nadella. Microsoft is having “a good dialogue” with the Open AI board of directors on the matter.

It is not clear if Altman is a Microsoft employee

When asked if Altman was now a Microsoft employee and would take his employees with him, Nadella responded evasively. “This is the decision of the board of directors, management and employees of Open AI.” The partnership with Open AI “of course depends on whether people stay with Open AI or come to Microsoft.” It is open to both options.

The usually well-informed portal “The Verge” reported on Monday night that Altman and Altman’s chairman and confidant Greg Brockman, who also left, were still trying to return to Open AI, if the rest of them follow them. 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 platform X (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) asking the board to resign and threatening to work for Altman and Microsoft. .

Does the board of directors resign?

Is that conceivable? A confidant of Altman told Handelsblatt that such a step was anything but impossible. A Microsoft source 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 he doesn’t do anything stupid and run away to the competition,” the source said. After that, anything is possible, including him returning as boss, running an independent company, or Microsoft even taking over the for-profit unit Open AI, if that’s legally possible.

Microsoft boss Nadella knows that competition is closely watching the chaos surrounding Open AI, in which Microsoft has invested $13 billion. Next week, cloud competitor Amazon Web Services (AWS) will hold its developer conference. One goal: attract new AI talent to AWS.

And Salesforce chief Mark Benioff announced at Platform X on Monday that he would be hired immediately. “Salesforce is offering full compensation in cash and stock to any Open AI researcher who has resigned,” Benioff wrote. “Send me your CV.” Google is also said to be interested.

Experts should not go to the competition.

According to analysts, Nadella should definitively prevent experts from leaving for the competition. Microsoft’s stock market value has increased by more than $980 billion since it announced its latest investment in Open AI in January. Stifel analyst Brad Reback wrote Monday that “this is the first time in more than two decades that (Microsoft) is not lagging behind an emerging technology trend.” Therefore, Microsoft customers must be able to trust that the Open AI drama will not disrupt Microsoft’s AI projects.

According to Brendan Burke of the analysis house Pitchbook, the latest Open AI model, GPT-5, is delayed again due to the chaos. Microsoft’s internal AI research lab 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 more than twenty AI startups, ten of them with billion-dollar valuations. These now have “a window of opportunity to make fundamental advances.”

In fact, Nadella has strongly aligned the group’s future with Open AI. At the end of January he announced multi-year investments worth about $10 billion.

As the risks increase, so does the pressure.

On Monday, pressure increased on the remaining board members who are critical of Altman: Quora CEO Adam D’Angelo, former GeoSim Systems head Tasha McCauley and Helen Toner of the Center for Security and Technology. Pop-up in Georgetown. – continued to grow high. Open AI employees explained online that they are currently ensuring the “stability and security” of the systems.

Given the open power struggle, the near-term risks for Microsoft are immense. Nadella has integrated Open AI’s AI models into nearly all of the company’s products. The assistant called “Microsoft 365 Copilot” supports programs such as Word, Powerpoint or Excel. Microsoft charges a $30/month fee for this. If Open AI crashes or the company’s AI interfaces become error-prone, this would directly harm Microsoft products.

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 data center spending. “We assume 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 the expense at more than $50 billion a year. “Microsoft is currently undertaking the largest infrastructure expansion humanity has ever seen,” he wrote.

This infrastructure is partially tailored directly to Open AI requirements. In general, Microsoft can adapt it to new projects and thus also help Altman and his team. However, in the short term, an Open AI collapse could cause significant damage to Microsoft, in terms of its stock price and customer confidence.

Altman said Monday on X that his top priority remains “ensuring open AI continues to thrive.” He and Microsoft have committed to “fully ensuring continuity of operations.”