Microsoft CEO Satya Nadella wants to calm the chaos

We remained calm – at least on the outside. After Microsoft chief Satya Nadella calmed markets on Monday night by announcing the hiring of ousted Open AI chief Sam Altman, he went on the (media) offensive in the evening.

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

The “adults in the room” took control

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 fired CEO Altman on Friday, an “embarrassing circus performance.” Only with Nadella’s intervention did the “adults in the room take control”. Microsoft shares closed Monday up 2%, reaching an all-time high of US$377.44.

In fact, at first glance, Nadella has struck a lucky break for Microsoft: by hiring Altman, the company is no longer dependent on a largely independent startup, but can bring Altman and his team’s experience directly into the company. .

Nadella also emphasized that Microsoft remains the “most innovative technology company” in the world. The core 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 about this.

It is still unclear whether Altman is a Microsoft employee

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

There is a report from the generally well-informed portal “The Verge” on Monday night that Altman and Altman chairman and confidant Greg Brockman, who has also left, were still trying to return to Open AI – if the remaining board 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% of the workforce – calling for the board to resign and threatening to work for Altman and Microsoft.

Is the board of directors resigning?

Is this conceivable? An Altman confidant told Handelsblatt that such a move was anything but impossible. A Microsoft insider told the same newspaper on Monday that it was possible that Nadella’s announcement before the market opened that he would hire Altman was intended to alleviate pressure.

“Maybe Altman will be parked for a short period of time so he doesn’t do anything stupid and escape to the competition,” the source said. After that, anything is possible – including him returning as chief, running an independent company, or Microsoft even taking over the for-profit Open AI unit, if that’s legally possible.

Microsoft chief Nadella knows the 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 of the goals: attract new AI talent to AWS.

And Salesforce chief Mark Benioff announced on Platform X on Monday that he would be hired immediately. “Salesforce is offering full cash and equity compensation to any Open AI researcher who has submitted their resignation,” Benioff wrote. “Send me your resume.” Google would also be interested.

Experts should not go into competition

According to analysts, Nadella should definitely 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 on Monday that “this is the first time in more than two decades that (Microsoft) has not lagged behind an emerging technology trend.” Microsoft customers should therefore be able to count on the open AI drama not derailing Microsoft’s AI projects.

According to Brendan Burke of analytics house Pitchbook, the latest Open AI model, GPT-5, is again delayed due to chaos. Microsoft’s internal AI research lab lags behind the competition, and even with new talent, “it will not immediately become as effective as open AI.” At the same time, competitors have invested in more than twenty competing AI startups, including ten with valuations in the billions of dollars. They now have “a window of opportunity to achieve fundamental advances”.

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

As the risks increase, so does the pressure

On Monday, pressure on the remaining board members who were critical of Altman – Quora platform CEO Adam D’Angelo, former GeoSim Systems chief Tasha McCauley and Helen Toner of the Center for Security and Emerging Technology 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 short-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 per month surcharge for this. If Open AI collapses or the company’s AI interfaces become error-prone, it would directly harm Microsoft’s products.

Microsoft has also started 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 that investments in our technical infrastructure will increase in the second half of 2023 and will continue to increase in 2024,” Hood said at the time. Semiconductor expert Dylan Patel has estimated spending at more than $50 billion a year. “Microsoft is currently undertaking the largest infrastructure expansion humanity has ever seen,” he wrote.

This infrastructure is partly adapted directly to the requirements of open AI. Microsoft can usually adapt it to new projects and thus also help Altman and his team. In the short term, however, a collapse of open AI could cause significant damage to Microsoft – in terms of its share price and customer confidence.

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