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Microsoft emerges big winner from OpenAI turmoil with Altman on board

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Altman will lead a new research team at the software giant after his surprise ouster by OpenAI shocked the tech industry.

Microsoft (MSFT.O) emerged as the big winner in the shakeup at OpenAI on Monday, hiring ousted CEO Sam Altman and other key startup personnel to stave off a potential flight to competitors and help it shore up its advances in the race for artificial intelligence.

The troubles at OpenAI since Friday have raised fears of consequences for Microsoft, which has injected billions of dollars and uses the pioneer’s technology for most of its AI offerings.

The move ensures that the “golden child of AI” will remain at Microsoft, analysts said, as the company competes with Alphabet-owned Google (GOOGL.O) to dominate the nascent industry.

Microsoft shares are up about 1.5%, with the company on track to add nearly $30 billion to its market value at current levels. This was almost equal to the valuation OpenAI commanded in its last fundraising round.

“If Microsoft had lost Altman, it could have turned to Amazon, Google, Apple or a host of other technology companies,” said Dan Ives, an analyst at Wedbush Securities.

“Instead, it is now safe at Microsoft headquarters. We see Microsoft now in an even stronger position with Altman and Brockman at Microsoft running the AI.”

Altman will lead a new research team at the software giant after his surprise ouster by OpenAI shocked the tech industry. He will be joined by Greg Brockman, another co-founder of OpenAI, as well as other researchers including Szymon Sidor.

Analysts also said more employees could join Microsoft as the unrest could impact what is expected to be an $86 billion stock sale by the startup, potentially affecting staff payouts from OpenAI.

“OpenAI’s for-profit subsidiary was about to complete a secondary valuation worth more than $80 billion. These ‘profit sharing units’ were going to be worth more than $10 million to key employees . Suffice it to say, it won’t happen now,” said industry newsletter SemiAnalysis.

Several employees of the startup, including former interim CEO Mira Murati, said in posts on social media platform X on Monday that “OpenAI is nothing without its people.”

At Microsoft, the team led by Altman will also likely have more access to necessary computing power, as the company is the second-largest U.S. cloud player and has committed to spending billions to increase its data center capacity.

“If the team had gone the startup route, they would have had to spend a lot of time rebuilding GPT-4. Instead, at Microsoft, they will have access to much of the intellectual property they need for them. future products,” SemiAnalysis said.

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