Topline
Microsoft stock jumped slightly Monday as a weekend fiasco landed the former CEO of the generative artificial intelligence startup OpenAI a high-level position at Microsoft, a saga that some analysts view as a positive for Microsoft despite the headaches.
Sam Altman, left, and Satya Nadella appear together at an OpenAI conference earlier this month.
Key Facts
Shares of Microsoft rose as much as 2% in the first minutes of normal trading hours Monday, gaining back much of Friday afternoon’s losses after the shock announcement of OpenAI board’s ouster of CEO Sam Altman (Microsoft reportedly has a 49% equity stake in OpenAI).
By Monday morning, Microsoft had tapped Altman and former OpenAI President Greg Brockman to join as the heads of its newly formed “advanced AI research” unit.
Early reactions among Microsoft analysts to the news, which seemingly damaged OpenAI’s valuation but bolstered Microsoft’s in-house AI offerings, were favorable.
Rosenblatt’s Barton Crockett wrote to clients Monday that Altman and Brockman’s hirings “clearly offer some transitional stability” for Microsoft, while Wedbush’s Dan Ives said Altman “safely” joining Microsoft puts the Washington-based firm “even in a stronger position” for AI.
It’s “music to the ears of investors” in Microsoft if Altman directly leads Microsoft’s AI division, according to Ives.
Crockett also suggested the OpenAI drama is likely “beneficial to others’ ambitions in AI,” specifically naming Google parent Alphabet and Amazon-backed Anthropic as potential winners (shares of Amazon rose 0.7% and shares of Alphabet were flat in Monday trading).
Surprising Fact
Microsoft hit a new all-time high share price Monday of $377.10, and the stock is up some 56% year-to-date.
What To Watch For
A few hours after Microsoft’s appointment of Altman and Brockman, another wrench was thrown into the OpenAI circus: About two-thirds of OpenAI’s employees told their board they will quit unless they reinstate Altman and Brockman to their posts.
Key Background
OpenAI is the maker of the wildly popular generative AI chatbot ChatGPT, launched last November to much fanfare. Altman’s firing Friday came as a complete surprise to Microsoft and OpenAI’s venture capital backers, and a significant push to bring back Altman failed after the startup opted to tap former Twitch CEO Emmett Shear to take on the same position at OpenAI on an interim basis. This January, Microsoft announced it made a multi-billion-dollar investment in OpenAI. Optimism about the legacy technology giant’s ability to capitalize on the AI craze drove Microsoft shares to their highest-ever level, swelling Microsoft’s market capitalization to nearly $3 trillion. Arguably OpenAI’s top competitor in the generative AI space is Amazon and Alphabet-backed Anthropic, while Alphabet has been perhaps Microsoft’s overall top rival in the space.
