What Microsoft hiring ousted OpenAI CEO means for AI arms race

Microsoft is turning OpenAI’s leadership crisis into an opportunity.

In the latest twist in a dramatic shakeup at the company behind ChatGPT, Microsoft said Monday it was hiring ousted CEO Sam Altman. OpenAI co-founder Greg Brockman, who left the company in solidarity with Altman, will also be joining Microsoft.

The two will form a new AI research team at Microsoft, according to an announcement from CEO Satya Nadella.

“I’m super excited to have you join as CEO of this new group, Sam, setting a new pace for innovation,” Nadella said in a tweet. “We’ve learned a lot over the years about how to give founders and innovators space to build independent identities and cultures within Microsoft, including GitHub, Mojang Studios, and LinkedIn, and I’m looking forward to having you do the same.”

A spokesperson from Microsoft said the company would not be commenting on the news beyond Nadella’s statements.

Microsoft and OpenAI have a deep, multi-billion-dollar partnership. But the local tech giant appeared to be as blindsided as the rest of the world by the board’s decision to force Altman out.

Nadella and Altman were all smiles and optimism on stage at OpenAI’s DevDay conference two weeks ago. The future they predicted seemed to include Altman remaining at the helm of OpenAI.

“There are a couple of things for me that are going to be very, very key for us,” Nadella said at the conference. “One is the systems that are needed as you aggressively push forward on your road map requires us to be on the top of our game.”

OpenAI’s board was vague in its announcement of Altman’s removal. The directors said Altman “was not consistently candid in his communications with the board,” causing the board to lose confidence in his leadership.

The news rattled Microsoft’s stock price late Friday, but the company flipped the script Monday by scooping Altman and Brockman up. Microsoft’s share price hit an all-time high Monday following the announcement.

Altman was a popular figure at OpenAI and in Silicon Valley. Before OpenAI, the Stanford dropout led Y Combinator, a startup accelerator and a fixture in the Bay Area tech scene. Some additional employees of OpenAI are expected to follow Altman and Brockman to Microsoft.

The shakeup could change the dynamics of power in the AI arms race. OpenAI and ChatGPT are the uncontested leaders of the pack when it comes to generative artificial intelligence, but instability at the company could be a boon for competitors.

Google — and its ChatGPT competitor Bard — seemed well positioned to take advantage of the shakeup at OpenAI over the weekend. But Microsoft scooping up Altman and Brockman could further cement the company’s advantage in the space.