• High corporate drama meets artificial intelligence
  • The stakes for investors could not be higher
  • Embrace AI or risk being left behind

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Capital at risk

Microsoft is one of those mega-tech companies that some people love to hate. It’s too big and a virtual monopoly. It stifles competition and innovation. Its customer service is poor. And so on.

And people say all of the above while using Microsoft products day in, day out. “Oh, but I use Apple products instead,” some might say in disagreement. The only problem with this is the word “instead”. The fact is, it has become almost impossible to get through a typical day without coming into contact with Microsoft in some way, if only indirectly.

Microsoft stands behind a great many things known by other names. Companies the world over rely on Microsoft to provide some part of their internal tech infrastructure. Few products and services in the world today do not, at some stage of design, origination, manufacturing, processing or distribution, use some aspect of Microsoft technology.

There once was a world without plastics too. But try getting through a typical day without coming into contact with plastics and you’ll get my point. Microsoft is, put simply, everywhere, whether seen or not. It is a tech Goliath.

This week, Goliath met David. But rather than fight, Goliath made David an offer he couldn’t refuse. And so he didn’t.

Virtually unknown a year ago, the CEO of artificial intelligence (AI) firm OpenAI, Sam Altman, was suddenly fired last week by the company’s board, which said in a statement that he “was not consistently candid in his communications with the board”.

While one can only speculate as to what specifically this lack of candour refers to, the fact that Mr Altman has already agreed to go and work for Microsoft might have something to do with it.

(Just as we are going to press it appears that Mr Altman might in fact be returning to OpenAI. Regardless of how this plays out, the stakes in cutting-edge AI are obviously extremely high.)

It also appears that a large number of OpenAI staff are in open revolt against the board. Microsoft has indicated that it has something of an open-door policy for those who would like to follow Mr Altman.

Although hardly an unbiased source in this particular instance, here is how the drama has been reported by MSN:

Microsoft stock has hit a record high after hiring sacked OpenAI boss Sam Altman and other key figures from the AI firm.

The US tech giant, which is a key investor in OpenAI, is the second most valuable company in the world behind Apple. The firm’s market cap on 21 November reached above $2.8 trillion – up $1 trillion since the start of the year.

Microsoft chief executive Satya Nadella announced that Mr Altman, who headed ChatGPT creator OpenAI until he was ousted on Friday, would join Microsoft to lead a new advanced AI research team alongside fellow OpenAI co-founder Greg Brockman

“We’re extremely excited to share the news that Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team,” Mr Nadella wrote on X, formerly Twitter. 

“We look forward to moving quickly to provide them with the resources needed for their success.”

Despite his new role, Mr Altman is reportedly keen on returning to his former company following a revolt among OpenAI employees against the board.

More than 700 OpenAI workers signed a letter threatening to quit unless the board resigns and reappoints Mr Altman as chief executive.

“The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardised all of this work and undermined our mission and company,” the open letter stated. “Your conduct has made it clear you did not have the competence to oversee OpenAI.”

Regardless of how this plays out in the end, one thing is clear: Microsoft isn’t messing around. It is determined to be a leading player in AI.

Sure, the company could have played nice and approached OpenAI with a generous acquisition offer, but it appears that it has chosen another course.

As mentioned in the article cited above, the market has rewarded Microsoft handsomely for its audacity, sending the company’s market value to an all-time high. Well played, Mr Nadella.

As I mentioned on Monday, my colleague Sam Volkering is also determined to remain ahead of the AI bandwagon. Hence, I’m pleased to learn that he’s planning another whirlwind trip through London in the coming days.

Who knows what might happen in the interim? Is more AI drama going to play out?

Given that it has demonstrated predictive power, AI itself might already know…

Until next time,

John Butler
Investment Director, Fortune & Freedom