Microsoft Hires Sam Altman. It Won’t Solve the Company’s OpenAI Problem.

Microsoft stock was up 1.6% in early trading on Monday. The stock dropped 1.7% Friday, when news of Altman’s dismissal from OpenAI broke.

The news of Altman’s hiring at Microsoft came after fraught efforts to restore him at OpenAI faltered late Sunday, with the ChatGPT developer’s board refusing to agree to the proposed terms of his reinstatement. Microsoft has a 49% stake in OpenAI but couldn’t overcome resistance to Altman’s return from the board that fired him last week. 

Having Altman working on AI for Microsoft is infinitely preferable for the company than having him join a rival such as Google-parent
Alphabet
(GOOGL) or
Amazon.com
(AMZN). However, Microsoft will have a delicate task to balance its support of Altman running its in-house team and still working with OpenAI.

“We remain committed to our partnership with OpenAI and have confidence in our product road map,” Microsoft CEO Satya Nadella said in a statement. 

Nadella also said that Microsoft looked forward to getting to know OpenAI’s new interim CEO, Emmett Shear, former chief executive of live video streaming platform Amazon-owned Twitch.

Microsoft will now find itself torn deciding how to divide its backing and resources between OpenAI and Altman’s team at Microsoft. While the natural course might look to be to support Altman and future technology that Microsoft has full control over, it has already reoriented a large part of its business around OpenAI’s software and poured billions of dollars into its funding rounds. Those are ties that can’t be undone quickly.

Microsoft will have to contend with what Altman’s firing has revealed about its effective lack of control over OpenAI and its board, which is tasked with making social good a priority over profit.

More than 500 employees of OpenAI have threatened to resign from the company if the current board doesn’t resign and reinstate Altman, The Wall Street Journal reported, citing a letter to the board.

Meanwhile, the costs of Altman’s team will now be borne on Microsoft’s balance sheet and the company will have to deal directly with Altman’s other ambitions, which included ventures for a consumer hardware device and a low-cost AI chips start-up, according to The Wall Street Journal.

“I’m super excited to have you join as CEO of this new group, Sam, setting a new pace for innovation. We’ve learned a lot over the years about how to give founders and innovators space to build independent identities and cultures within Microsoft,” Nadella said in a post on social-media platform, X, formerly Twitter, directed at Altman.

Write to Adam Clark at [email protected]