Microsoft the big winner from chaos at OpenAI

The recent chaos at ChatGPT developer OpenAI, which fired and then rehired its chief executive Sam Altman, was watched closely by Microsoft shareholders.

Shares at Microsoft, which has invested $13 billion (€11.9 billion) in OpenAI, fell on news of Altman’s sacking before rebounding and hitting new highs for 2023.

Shares in the $2.8 trillion tech giant Microsoft are up almost 60 per cent this year, and much of that is AI-related, so the final outcome is undeniably good for Microsoft. The fact Microsoft was kept in the dark over Altman’s sacking raised questions about its ability to manage its investments.

There has long been a tension between profit- and safety-focused individuals at OpenAI. Altman’s triumphant return, and OpenAI’s subsequent board changes, represent a victory for those with a commercial focus. They include Microsoft, which looks set to play a bigger role at OpenAI.

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Microsoft chief executive Satya Nadella’s offer to hire Altman and all of OpenAI’s 770 staff forced the OpenAI board to quickly back down, as well as enhancing Microsoft’s reputation as a top destination for in-demand AI engineers.

Microsoft trades on 36 times trailing earnings and 33 times estimated earnings. That’s expensive relative to its recent history and to mega-cap rivals such as Google and Apple. However, bulls will see Microsoft’s strengthened position in the AI race as evidence it can justify its elevated valuation.