My colleagues at Creative Strategies always thought, strategically, that Microsoft should buy OpenAI. But, we were sure that being big tech, regulators would never let it pass.
Microsoft’s hiring of Sam Altman and Greg Brockman, and likely many OpenAI employees, will achieve the same purpose. In doing so, Microsoft became an even greater force with which to reckon.
Microsoft now could have less reason to lean on OpenAI for future AI breakthroughs and advanced AI solutions. Any new AI research led by Sam Altman and others who follow him to Microsoft will quickly become one of the most critical divisions at Microsoft, driving its AI future.
Another side benefit of Altman moving to Microsoft is his potential to influence Microsoft’s custom silicon plans.
Microsoft’s interest in OpenAI was always about getting the mindshare of its brain trust. With the missteps of OpenAI’s board, they handed that brain trust to Microsoft on a silver platter. And if many of OpenAI’s staff quit to join him at Microsoft, that brain trust could expand exponentially.
Another way to think about this is that a bloodless coup gave Microsoft many new keys to its AI kingdom.
In a Creative Strategies note released today, we published the following analysis of what has just happened:
“From a strategic standpoint, this is a huge win for Microsoft. From the very beginning of Microsoft’s relationship with OpenAI and how Microsoft was deeply partnering with the company, we always thought an acquisition made sense but would be difficult to pass regulatory scrutiny. Owning OpenAI, and specifically the ChatGPT foundational model, would put Microsoft in a position to own one of the most critical parts of the AI stack. Despite the massive amount of investment and close relationship with Sam Altman and Satya Nadella, there was clearly still risk associated with relying on a third party for a critical part of your AI stack. That risk was made more evident with the shakeup at OpenAI over the weekend.
Many wondered how investors and partners like Microsoft could have made such a big bet on a company with such a shaky governance structure. The only explanation was Sam Altman; those investors and partners were investing and partnering and betting on Sam.
In our view, most strategic concerns are quelled as Sam Altman and Greg Brockman are now leading a new division at Microsoft that is likely the most important division for Micrsosoft’s future. Recent news also suggests a good portion of the OpenAI employees are also likely to join this division at Microsoft. Meaning, that Microsoft has now essentially acquired OpenAI with zero money down and no regulatory issues.
Our note last week around the news from Ignite emphasized Microsoft’s desire to go full-stack AI. The missing piece was owning their own foundational model. This move makes that path clear, and Microsoft’s ability to truly go full-stack AI is now in place.
For now, Microsoft will still need to collaborate with OpenAI, given the tight integration with Azure and into parts of Windows and Office 365. But, we fully expect this move to mean Microsoft transitions away from OpenAI and moves to their foundational model, which could take up to a year, we are told from experts in the field we have spoken with.
Lastly, this move has made Microsoft’s efforts in custom silicon, announced last week, even more interesting. There were rumors Sam Altman had been discussing raising additional capital to create silicon that could eliminate the dependence on Nvidia. While that alone is a monumental task, Microsoft’s Maia custom accelerator, which Sam Altman aided with, could take that path going forward. The unique angle here is the ability to develop a foundational model deeply tied to silicon architecture for training and inference. The implications of this are extremely intriguing and could only help deepen Microsoft’s differentiation here as a truly full-stack AI company.”
The blunder of OpenAI’s board that handed Sam Altman and Greg Brockman will benefit Microsoft in ways we can’t even imagine. But it does suggest that Microsoft just won an AI lottery without spending a dime to win it.
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