Microsoft emerged victorious in the artificial intelligence talent wars by hiring ousted OpenAI CEO Sam Altman and other key staff from the pioneering startup. This coup ensures Microsoft retains exclusive access to OpenAI’s groundbreaking AI technology for its cloud and Office products.
OpenAI has been a strategic partner for Microsoft since 2019, when the software giant invested $1 billion in the nonprofit research lab. However, the surprise leadership shakeup at OpenAI late last week had sparked fears that Microsoft could lose its AI edge to hungry rivals.
Hiring Altman and other top OpenAI researchers nullifies this threat. Altman will lead a new Microsoft research group developing advanced AI. Joining him from OpenAI are co-founder Greg Brockman and key staff like Szymon Sidor.
This star-studded team will provide Microsoft with a huge boost in the race against Google, Amazon and Apple to dominate artificial intelligence. Microsoft’s share price rose 1.5% on Monday on the news, adding nearly $30 billion to its valuation.
The poaching also prevents Altman from jumping ship to competitors, according to analysts. “If Microsoft lost Altman, he could have gone to Amazon, Google, Apple, or a host of other tech companies,” said analyst Dan Ives of Wedbush Securities. “Instead he is safely in Microsoft’s HQ now.”
OpenAI Turmoil Prompted Microsoft’s Bold Move
The impetus for Microsoft’s talent grab was OpenAI’s messy leadership shakeup last week. Altman and other executives were reportedly forced out by OpenAI board chair.
The nonprofit recently created a for-profit subsidiary to commercialize its research. This entity was prepping for a share sale at an $86 billion valuation that would financially reward employees. But with Altman’s ouster, these lucrative payouts are now in jeopardy.
This uncertainty likely prompted top OpenAI staff to leap to the stability of Microsoft. Analysts believe more employees could follow as doubts grow about OpenAI’s direction under Emmett Shear.
Microsoft’s infrastructure and resources also make it an attractive home. The tech giant can provide the enormous computing power needed to develop ever-larger AI models. OpenAI’s latest system, GPT-3, required 285,000 CPU cores and 10,000 GPUs to train.
By housing OpenAI’s brightest minds, Microsoft aims to supercharge its AI capabilities across consumer and enterprise products.
The Rise of AI and Competition in the Cloud
Artificial intelligence is transforming the technology landscape. AI powers everything from search engines and digital assistants to facial recognition and self-driving cars.
Tech giants are racing to lead this AI revolution, as it promises to reshape industries and create trillion-dollar markets. This battle spans hardware, software and talent acquisition.
Microsoft trails category leader Google in consumer AI, but leads in enterprise applications. Meanwhile, Amazon dominates the cloud infrastructure underpinning AI development.
Cloud computing and AI are symbiotic technologies. The hyperscale data centers operated by Azure, AWS and Google Cloud provide the computational muscle for AI training. These clouds also allow companies to access AI tools on-demand.
This has sparked intense competition between the “Big 3” cloud providers. AWS currently has 33% market share versus 21% for Azure and 10% for Google Cloud. But Microsoft is quickly gaining ground.
Hiring Altman could significantly advance Microsoft’s position. His team can create exclusive AI capabilities that serve as a differentiator for Azure versus alternatives.
Microsoft’s Prospects in AI and the Stock Market
Microsoft’s big OpenAI poach turbocharged its already strong prospects in artificial intelligence. With Altman on board, Microsoft is better positioned than any rival to lead the next wave of AI innovation.
This coup should aid Microsoft’s fast-growing cloud business. New AI tools could help Microsoft chip away at AWS’s dominance while holding off Google Cloud.
If Microsoft extends its edge in enterprise AI, that would further boost revenue and earnings. This helps explain Wall Street’s positive reaction lifting Microsoft’s stock 1.5% and adding $30 billion in market value.
The success of cloud and AI has fueled Microsoft’s transformation from a stagnant also-ran to a Wall Street darling. Its stock has nearly tripled since early 2020 as earnings rapidly appreciate thanks to its cloud and subscription-based revenue.
Microsoft stock trades at a reasonable forward P/E of 25 and offers a dividend yield around 1%. If Microsoft keeps leveraging AI to expand its cloud business, its stock could have much further to run.
Hiring Altman and deploying OpenAI’s technology across Microsoft’s vast resources places a momentous technology advantage within the company’s grasp. Realizing this potential would be a major coup for Satya Nadella as CEO. With OpenAI’s crown jewels now safely in house, Microsoft’s tech lead looks more secure than ever.