Microsoft ends weekend of OpenAI drama with coup of its own

After three days of high drama at the world’s most closely watched startup, which many compared to a coup, Microsoft Corp. capped the weekend with one of its own: The software giant hired ousted OpenAI chief Sam Altman.

The moves reshape the world of artificial intelligence given that OpenAI is behind the hugely popular ChatGPT app that took generative AI into the mainstream, and Altman was its figurehead.

He was unexpectedly fired by OpenAI’s board on Friday, setting off a frenzied weekend campaign to reinstate him, led by OpenAI executives and key investors — including Satya Nadella, the chief executive officer of Microsoft, which had pledged more than $10 billion for the startup.

Instead, OpenAI’s board replaced Altman with Emmett Shear, the former CEO of Twitch, in a stinging rebuke to its investors. Nadella then announced that he had recruited Altman and Greg Brockman, another OpenAI co-founder who had quit in protest, to lead a newly formed in-house AI research unit at Microsoft, casting a shadow over the future of its prized investment.

Now OpenAI, which was in talks with investors about a $86 billion valuation, risks an exodus of employees to Microsoft and other rivals, and an end to its stunning growth. And the startup will face close scrutiny over its ability, or willingness, to turn its cutting-edge AI into profits.

At the heart of the divide is whether AI should be a commercial opportunity or is a potentially dangerous technology that needs to be checked and scrutinized at every turn.

The weekend drama bares the divisions that built up at OpenAI over the years, culminating with the removal of Altman. One of the fissures was Altman’s drive to turn OpenAI, which began as a nonprofit organization, into a successful business — and how quickly he wanted the company to crank out products and sign up customers. That ran headlong into board member concerns over the safety of AI tools capable of generating text, images and even computer code with minimal prompting.

The fallout from the board’s decision to defy investors is likely to be widespread. Thrive Capital had been expected to lead an offer for employee shares, a deal that would value OpenAI at $86 billion. As of this weekend, the firm had not yet wired the money and it told OpenAI that Altman’s departure will affect its actions.

The turmoil also threatens to undermine Microsoft’s biggest investment in AI, a $13 billion bet on OpenAI and its former CEO. The US software leader owns almost half of the startup but wasn’t able to sway the board.