Hello and welcome to Eye on AI.
We started off last week’s newsletter declaring that it had been a big week for OpenAI. It turns out the DDoS attack, data partnerships announcement, GPTs buzz, and pausing of ChatGPT Pro subscriptions due to overwhelming demand was nothing compared to what was to come.
On Friday night, OpenAI cofounder and CEO Sam Altman was abruptly fired by the company’s board. To say this was shocking is an understatement; Altman had just launched the fastest growing consumer tech product in history (ChatGPT), was in the process of leading the company to a soaring $85+ billion valuation, and was highly respected in and outside of the company. The blog post announcing the “leadership transition” offered no concrete reason or details, and even Microsoft, the company’s close partner with more than $10 billion invested, was blindsided, with CEO Satya Nadella learning of Altman’s firing just moments before it was made public.
Immediately after the news broke, the dominos of OpenAI started falling like a Rube Goldberg machine. OpenAI cofounder and president Greg Brockman resigned in solidarity and after being removed by the board as chairman himself, and the company’s top engineers followed suit. Dozens more employees quit as a movement to reinstate Altman — backed by Microsoft, other investors, and various tech industry executives — started to take serious shape. The other shoe dropped Sunday night when Nadella announced Altman and Brockman were joining Microsoft to lead a “new advanced AI research team,” and then again on Monday when nearly every one of OpenAI’s 770 employees signed a letter threatening to follow Altman to Microsoft if the board members don’t resign and reinstate the ousted leaders.
If the board sticks to its guns, it looks like OpenAI may cease to exist. But even if Altman and the other defecting employees return to OpenAI, it’s clear these events have completely ripped open the generative AI landscape. The fallout could be a golden ticket for competing AI startups and tech giants, and it’s already starting a fierce battle for talent. Even Microsoft, who many were quick to declare the big winner in the situation, is on shaky ground.
As the chaos ensued over the weekend, The Information reported that more than 100 OpenAI customers contacted Anthropic, which recently cozied up with Amazon for cloud computing and an investment of up to $4 billion and just today unveiled Claude 2.1. Others reached out to startup rival Cohere, are considering tapping Meta’s Llama 2, and are looking to switch their cloud providers from Microsoft Azure to Amazon Web Services or Google Cloud.
"We chose OpenAI because of its perceived stability," DSQ Solutions founder Charlie Dolan told Business Insider when discussing switching to Azure and Anthropic.
As is often true in tech, talent is quickly becoming central to the upheaval. AI startups like Cohere and Adept rushed to poach from OpenAI, and Google’s DeepMind received an uptick in resumes. Executives and AI leaders including Inflection AI CEO Mustafa Suleyman, Nvidia senior AI scientist Jim Fan, and Salesforce CEO Marc Benioff are publicly wooing OpenAI researchers and engineers, while many more are likely doing so behind closed doors. When one commenter playfully called out Fan for poaching, he replied that there’s “no better time to do so.”
In a podcast interview with tech journalist Kara Swisher recorded yesterday, Nadella noted the stiff competition for AI talent and pointed to it as the reason he’d welcome all OpenAI employees to the new Altman-led “advanced AI research team.”
“I just wanted to make sure that in a world where people have choices, that if they’re going to leave OpenAI, Microsoft is a choice for them,” he said.
There was no sense this would be his preferred outcome, however. While calm, Nadella appeared to be in full crisis comms mode as he insisted repeatedly that everything is totally fine and actually nothing has even changed at all. He’s continuously punted to the OpenAI board and made clear that the potential total implosion of OpenAI would be on them, almost as if he’s daring them to go through with it. And indeed, sources speaking to The Verge characterized the current arrangement as a “holding pattern” and said that Altman joining Microsoft isn’t a done deal.
When OpenAI’s “wild weekend” started to unfold, many were quick to declare Microsoft the big winner. The tech giant already had the cloud infrastructure, access to OpenAI’s technology, almost half the equity, and now just scored the beloved AI kingpin and what seemed like a ton of leverage and power.
“You can make the case that Microsoft just acquired OpenAI for $0 and zero risk of an antitrust lawsuit,” Ben Thompson wrote in Stratechery.
But with more power comes significantly more responsibility. Instead of enjoying the high-reward, low-risk benefits of a partnership, Microsoft is essentially absorbing the apparent global leader in AI through a coup of sorts. In addition to exposing Microsoft to greater anti-competitive scrutiny, this whole saga was a major rug pull for Microsoft and exposed how OpenAI’s wonky governance structure had the tech giant in an extremely high-risk situation all along. Despite Nadella’s insistence otherwise, everything has changed.
And with that, here’s the rest of this week’s AI news.
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And with that, here’s the rest of this week’s AI news.
Sage Lazzaro
sage.lazzaro@consultant.fortune.com
sagelazzaro.com
