How Microsoft’s Satya Nadella kept the OpenAI partnership alive

Just two weeks ago, Microsoft’s Satya Nadella stood on stage alongside OpenAI’s Sam Altman at the startup’s conference in a former San Francisco concert hall. Both wore black jeans, Mr. Altman in an army green shirt and Mr. Nadella in casual navy blue attire.

“We love you guys!” » Mr. Nadella said, turning to Mr. Altman.

“Awwww,” Mr. Altman replied.

Mr. Altman called the relationship between OpenAI and Microsoft “the best technology bromance.” Since 2019, the companies have worked together to create advanced artificial intelligence systems that they say could be the most important technological innovations of a generation, and Microsoft has invested $13 billion in OpenAI. Together, they planned to take on Google’s hammer on the Internet.

This relationship is put to the test. When the nonprofit board that controls OpenAI ousted Mr. Altman, the company’s co-founder and CEO, on Friday, Microsoft received only minutes of warning before the decision was made public .

Over the past three days, Mr. Nadella has made clear that he is not about to walk away from the partnership, but OpenAI’s future may be uncertain. And what could have been an embarrassing moment for Mr. Nadella and his company turned into a show of strength within the company that stunned industry insiders.

Since OpenAI launched its ChatGPT chatbot nearly a year ago, artificial intelligence has captured the public imagination, with hopes that it could be used for important work like drug research or to help teach children. It could also lead to job losses or even autonomous war. And whoever builds it could control what some computer scientists consider one of the most important new technologies since the steam engine.

On Sunday evening, hours after OpenAI’s board said it stood by its decision to remove Mr. Altman, Microsoft moved to hire Mr. Altman and Greg Brockman, who resigned as chairman of OpenAI after the decision of the board of directors. Mr. Nadella said the two would run a new AI research lab for Microsoft, and most of OpenAI’s more than 700 employees said they would step aside and offer their services to Microsoft if Mr. Altman n was not reinstated.

“We look forward to moving quickly to provide them with the resources they need to succeed,” Nadella said. said on X, formerly Twitter.

Microsoft and OpenAI declined to comment.

Mr. Nadella’s aggressive move against OpenAI was the culmination of an eventful weekend. It exposed a fault line between tech industry leaders who are working to make AI a giant business and an increasingly influential part of the tech community who think AI could be dangerous.

A key member of OpenAI’s board said Mr. Altman was moving too fast to expand his company without paying enough attention to AI safety, moving from fear that it would eliminate jobs to belief that it could pose a threat to humanity.

Although Mr. Nadella and his company tried unsuccessfully to help resolve OpenAI’s leadership collapse over the weekend, he had more influence over the San Francisco startup than many people didn’t think so.

OpenAI likely only saw a portion of the $13 billion committed by Microsoft because it was supposed to be paid over time – although the exact terms of the deal are unclear. Additionally, Microsoft signed a deal giving it copies of OpenAI’s most advanced technology and has been working with it for over a year. Microsoft has provided OpenAI with the enormous computing power it needs to develop its AI.

With all this, Mr. Nadella could rebuild OpenAI within Microsoft without wasting much time or money. It is also not excluded that the OpenAI board could give in to employee pressure to bring back Mr. Altman and his allies, with significant changes to the board. Mr. Nadella could live with that too.

“It’s like you forgot the nonsense that happened for four days — Sam is still Sam, and he’s running the show,” said S. Somasegar, a former Microsoft executive now at Madrona Venture Group who has been in contact with Mr. Nadella. “Microsoft will win in the end no matter what happens here.”

For Microsoft, an OpenAI implosion presented a major risk to its plan to integrate AI into everything it does. Microsoft owns 49% of OpenAI, but has no direct influence over its board of directors.

But to avoid having no explicit control over OpenAI, Microsoft negotiated contracts that gave it rights to OpenAI’s intellectual property, copies of the source code for its key systems as well as the “weights” that guide the results. of the system after its formation. on the data, according to three people familiar with the matter, who were not authorized to discuss it publicly.

“This is Microsoft’s fundamental protection,” Mr. Somasegar said.

Mr. Nadella rushed to speak with OpenAI’s board of directors on Friday afternoon in an attempt to calm the tense situation. He said Microsoft will continue working with OpenAI, but it’s unclear what will remain of the company.

Microsoft investors, who feared that Microsoft would be put in a difficult situation because of OpenAI’s management mess, applauded Mr. Nadella’s decision. Microsoft’s stock price rose more than 2% on Monday to reach a record high.

Mr. Nadella and his chief technology officer, Kevin Scott, had close relationships with Mr. Altman and Mr. Brockman. Mr. Nadella and Mr. Altman have known each other since 2018, when they met at the Allen & Company High Power Conference in Sun Valley, Idaho. At the time, OpenAI was a nonprofit research lab dedicated to creating secure artificial general intelligence.

But OpenAI needed large amounts of expensive computing power, so to attract investors, it created a for-profit company still under the control of the nonprofit board.

Since its first billion-dollar investment in OpenAI in 2019, Microsoft has treated the much smaller company like a technology incubator. OpenAI was particularly focused on AI – like a pack of wolves, as one former Microsoft executive described it – while Microsoft had to manage a wide range of businesses, from cloud computing and software to computer games.

OpenAI now finds that it needed Microsoft much more than Microsoft needed OpenAI. Microsoft developed and supplied the vast computing power that runs OpenAI, and has negotiated a series of legal and commercial agreements to protect it if something goes wrong.

Microsoft spent months negotiating a $10 billion investment, finalized in January, and has worked to keep its stake just below 50%. Among other things, it feared that having majority control would expose it to antitrust scrutiny, according to the three people familiar with the matter. And Mr. Nadella has avoided interfering in the management of OpenAI.

The chaotic weekend showed he doesn’t need a seat on the board to have power.

The report was provided by Cade Metz, Erin Griffith, Mike Isaac And Tripp Mickleall from San Francisco.