As one of the world’s most important AI companies unraveled this weekend, Satya Nadella ensured Microsoft became even more powerful.
By David Jeans and Rich Nieva, Forbes Staff
Microsoft CEO Satya Nadella’s move to hire OpenAI cofounders Sam Altman and Greg Brockman after their sudden departure from the startup is being heralded as a genius business move for the tech giant, helping it consolidate its growing power over one of the most exciting new technologies in years.
After being blindsided by OpenAI’s board decision to push out Altman on Friday, Nadella worked to broker a deal between Altman and the board over the weekend to bring him back as CEO — one that failed multiple times — before announcing that Altman and Brockman would be joining Microsoft to run a new AI research arm late Sunday night before markets opened. On Monday, Microsoft stock spiked 2%, raising its market cap to $2.81 trillion — more than 30 times the most recent $90 billion valuation OpenAI was seeking in a recent effort to raise funding.
On Monday, as hundreds of OpenAI employees demanded that the company’s board resign and Altman be reinstated as CEO, Nadella reaffirmed Microsoft’s commitment to OpenAI, while touting the arrival of his new employee. “We look forward to moving quickly to provide them with the resources needed for their success,” he wrote on the social media platform X.
Though to observers, Nadella appeared to have pulled off one of the one of the tech industry’s most remarkable acquihires — without an actual acquisition. Two decades after the US Department of Justice took Microsoft to trial in a landmark case over antitrust claims involving its internet browser, the absorption of OpenAI’s leadership proved an impressive maneuver for a company with a notorious history of competition woes. “Microsoft bought OpenAI without getting the antitrust involved,” Rishi Jaluria, a Microsoft analyst at RBC told Forbes.
“It’s the best move for Satya to be making right now,” Margaret Mitchell, chief ethics scientist at Hugging Face, and a former Microsoft researcher, told Forbes. “It’s an interesting affirmation of the view that a lot of people were starting to have that OpenAI was becoming an arm of Microsoft.”
Microsoft had not replied to a request for comment at the time of publication.
Once one of the most feared tech giants in the industry, Microsoft’s image as an innovator had waned over the years as internet juggernauts like Google and Facebook ascended. Nadella’s surprise announcement underscored how far Microsoft had surged back. “If you told me 10 years ago that a group of the smartest engineers in the land would evoke the threat, “Do what I say or I will go to work at Microsoft,” I would not have believed you,” Benchmark investor Bill Gurley tweeted. “Amazing shift in corporate reputation (and much credit to Satya).”
Altman himself issued somewhat conflicting assurances of his future on Monday. In a post on X seemingly directed at his former OpenAI employees, “We are all going to work together some way or other.” Minutes later, he sent another post explicitly nodding to the Microsoft CEO, writing, “Satya and my top priority remains to ensure OpenAI continues to thrive.” He vowed to continue operations for OpenAI’s customers, and added that the “the OpenAI/Microsoft partnership makes this very doable.”
A report by The Verge on Monday suggested the dissonance between Altman’s tweets may have been quiet corroboration that the pair were still willing to return to OpenAI with the right terms. By Monday afternoon, Nadella appeared to acknowledge that the hires were not a done deal. Asked on CNBC about his level of clarity that Altman, Brockman and their hundreds of OpenAI colleagues were indeed joining Microsoft, Nadella said, “That is for OpenAI’s board and management and the employees to choose.” He added, “We want Sam and Greg to have a fantastic home if they’re not going to be an OpenAI.”
The AI opportunity was not one that seemed to be easily Microsoft’s for the taking, until recently. “I’ve been close to Microsoft, and I never would have believed that Microsoft would be a leader in AI two years ago, and pretty much everybody I know would say that,” Bob Muglia, former Snowflake CEO and longtime Microsoft executive, told Forbes. “[OpenAI] was a golden goose that laid the golden egg, but Satya was feeding that goose.”
Nadella’s position as AI overseer caps nearly a decade of commanding record growth at Microsoft — in large part thanks to the success of its cloud computing unit Azure, which tapped into Microsoft’s longstanding relationships with enterprise clients. After joining Microsoft in 1992, he spent decades working his way through the company, before being appointed CEO in 2014, taking over the reins from Steve Ballmer. “I’ve viewed Satya for quite some time as the wise man of the tech industry, the Yoda that helps to make the right things happen,” said Muglia, who was replaced by Nadella in 2011 as a Microsoft executive. “And it feels here like he is very much playing that role here in being the adult in the room.”
Though for years, Microsoft appeared to be losing the AI race to Google as the internet giant pioneered breakthroughs in the space, like inventing the transformer concept that underpins OpenAI’s ChatGPT, and building an AI machine that could beat a human at the strategic game Go.
But Microsoft bet on OpenAI early and in 2016, the two organizations announced that OpenAI would use Microsoft Azure as its primary cloud partner. As they grew closer, more product announcements followed — including a supercomputing AI technology built on Azure and collaborations with Github — as OpenAI released groundbreaking advancements in its technology, first with GPT3, which generate text for things from computer code to blog posts, and DALL-E, the AI photo generator.
In turn, Microsoft poured in investments totalling $3 billion, as OpenAI grew. “What excites me is the opportunity the two organizations have,” Nadella told Altman in an interview, announcing another partnership in 2019.
While Google and Amazon made bets on the OpenAI breakaway company Anthropic, by the end of 2022, Nadella had positioned Microsoft to take advantage of the most thought-provoking product the tech world had seen in ages: ChatGPT. Charles Simonyi, the billionaire creator of Microsoft Office, who Forbes estimates is worth $6.9 billion, said that Nadella is overseeing Microsoft’s next frontier. “You asked if it’s the biggest thing in Microsoft’s history,” Simonyi said, “it’s certainly in terms of just technology, it rivals Moore’s law.”
Though Nadella’s future as an AI leader appears tied to Altman’s. Earlier this month, Nadella stepped on stage to join Altman for a surprise appearance at OpenAI’s first developer day conference, delivering a call to arms to AI researchers across the world. “Our job number one is to build the best systems,” Nadella told the audience, “so you can build the best models and deliver those to developers.” Altman turned to Nadella and echoed the sentiment: “I think we have the best partnership in tech.”