Steve Jobs, driven by his genius and his gut, invented the iPhone and built Apple into the world’s most valuable company. He was uncompromising, larger than life and irreplaceable. His life was creating the future, which would be filled with devices controlled by their users.

Sam Altman spent the last year taking on the mantle of Mr. Jobs as the Silicon Valley entrepreneur in charge of tomorrow. It is the biggest job in Silicon Valley, and now the most difficult. As more people worry they will be controlled rather than in control, the future is fraught with danger.

Until Friday, Mr. Altman was the chief executive of OpenAI, the dominant artificial intelligence company. He promised A.I. would usher in humanity’s first golden age even though it came from the same kind of inventors who thought there was a market for internet-connected toasters.

Mr. Altman’s vague but vast ambitions got him in trouble with the board of OpenAI, which said he was “not consistently candid” in his communications and fired him. This shocked Silicon Valley, which did everything but march to the company’s San Francisco headquarters with pitchforks to demand Mr. Altman’s reinstatement. The future is abstract, but serious money was at risk.

The attempt at a reinstatement apparently failed — this is an ongoing saga — but the last few days deepened the parallels to Mr. Jobs, who was marginalized by the board of Apple in 1985. Apple was faltering, and Mr. Jobs was not exactly a model employee. He left the company of which he was a founder and the personal computer industry he championed.

Eleven years later, with Apple even worse off, Mr. Jobs returned. It was the greatest second act in American business history. Apple is now worth $3 trillion.

The career of Mr. Jobs, who died in 2011, presents tech founders with an enticing but perhaps impossible comparison. There are many clichés about Silicon Valley that Silicon Valley likes to believe are true, including “It’s not about the money” and “Move fast and break things” and “Three people are building something in a garage that will be the next Google.”

One of the most persistent clichés is that of the visionary founder — the executive who can reach into the future, break off a piece and make it into something that the masses adore. Do this right and your company will be worth a trillion dollars. Do it wrong and you have an overpriced toaster.

The legend of the visionary founder didn’t start with Mr. Jobs, but he pushed it to a new level. “He seemed to be able to see slightly beyond the horizon when other people couldn’t see beyond the end of their nose,” Michael Moritz, an Apple historian who later became a venture capitalist, told The New York Times in 1985.

It was a description Mr. Jobs himself came to embrace. “Some people say, ‘Give the customers what they want,’” he said, in one of most-quoted statements. “But that’s not my approach. Our job is to figure out what they’re going to want before they do.”

Mr. Jobs made it look easy. A little device that holds a thousand songs? Sold. But even with something as simple to understand as self-driving cars, what people are going to want is not quite clear.

As Mr. Altman was unsuccessfully negotiating Sunday to get his job back, the resignation of Kyle Vogt as chief executive of Cruise, General Motors’ self-driving-car division, was announced. His departure was prompted by a nightmarish sequence of events last month when a woman in San Francisco who had just been the victim of a hit-and-run was then run over by a Cruise robotaxi. Cruise’s license to operate in California was suspended after the accident.

Mr. Vogt was a co-founder of Cruise, which G.M. bought in 2016, and was a principal architect of its success in a once-crowded field of autonomous start-ups. His hard-charging ways are now a liability, which made his exit an inevitability. Self-driving advocates can argue that many more people are injured by human drivers than autonomous vehicles, but there is something deeply unsettling about a car that seems to go rogue.

Mr. Vogt was replaced by two G.M. insiders, one of them its general counsel. It was a pointed message: This is not a moment for visionary leaders.

For all the relentless exaltation of Mr. Altman over the weekend, the extravagant claims made by him and his former OpenAI colleagues will eventually have their own moment of reckoning. A.I. “is going to be the greatest force for economic empowerment and a lot of people getting rich we have ever seen,” he said in February. People are going to ask: Who is getting rich, exactly? Did I want this?

Before a version of ChatGPT was released to the public a year ago, Mr. Altman was largely unknown beyond Silicon Valley. He was an semi-successful entrepreneur who had run Y Combinator, the start-up incubator. He learned there that turmoil always lurked underneath a promising new company. “Start-ups on the inside are always badly broken,” he said.

Mr. Altman had the reputation of a swashbuckler. He wrote on his blog in 2017 that he felt more comfortable discussing controversial ideas in communist Beijing than in liberal San Francisco. Maybe he was thinking of the time in 2015 when he said at a conference that “A.I. will probably most likely lead to the end of the world, but in the meantime, there’ll be great companies.”

Are the world’s people going to get their eyeballs scanned in return for some fake currency and vague promises that their retinas will be used, somehow, someday, by someone to help prove they really exist? That was one of Mr. Altman’s side bets, introduced this summer. Even as it was mocked, he declared that “we especially love our haters, it gives us energy, please keep it coming!”

Hundreds of OpenAI employees signed a letter Monday demanding Mr. Altman’s return. On Friday, it was one of the most important companies in Silicon Valley; on Monday morning, most of its employees were threatening to quit. Mr. Altman is the visionary founder who can save them, and OpenAI, and perhaps all mankind.

This superhero narrative is the secret engine of just about every book beloved by Silicon Valley entrepreneurs. Travis Kalanick, a founder of Uber, was a devotee of Ayn Rand, whose heroes are at war with society. Jeff Bezos, the founder of Amazon, was a childhood fan of “Star Trek,” where Captain Kirk made every decision and took charge of every landing party. Peter Thiel, the venture capitalist who backed Donald J. Trump in 2016, loves “The Lord of the Rings,” an epic tale where a handful of heroes save the world. Mr. Thiel’s corporate names (Palantir, Mithril, Valar) are taken from the story.

Mr. Altman, to his credit, has endorsed a wide reading list that goes beyond books written by his friends in Silicon Valley, like Mr. Thiel. He recommended another Valley favorite, Isaac Asimov’s “Foundation” science fiction series, which is once again about how a charismatic and farseeing savant and his mostly male acolytes can save everyone, in this case 25 million planets.

But the path to becoming a real-life Gandalf or Captain Picard is strewn with peril.

Elizabeth Holmes of Theranos modeled herself on Mr. Jobs. When she couldn’t get her blood-testing technology to work, she simply pretended it did. Adam Neumann promised to reinvent the office experience with WeWork. It declared bankruptcy two weeks ago, although Mr. Neumann did manage to become rich. Sam Bankman-Fried, the bright promise of cryptocurrency, will be sentenced in March for fraud. Elon Musk has not helped his reputation or his bank account by buying Twitter, now called X.

For Mr. Altman, this past weekend may have been a personal peak. For all the talk of A.I. taking jobs, he suddenly became the one essential person in all technology. A post on X by Eric Schmidt, the former chief executive of Google, captured some of the mood, and never mind that Google is in a fierce competition with OpenAI:

“Sam Altman is a hero of mine. He built a company from nothing to $90 Billion in value, and changed our collective world forever. I can’t wait to see what he does next. I, and billions of people, will benefit from his future work — it’s going to be simply incredible.”

This is Jobs-level praise. Perhaps wisely, Mr. Altman scorned all the offers he was getting to fund his next start-up. Microsoft, the biggest investor in OpenAI, announced late Sunday that he would be coming there. He’ll work for others now.

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He told CNBC "something has to change" at the firm, but did not specify what that was, or rule out the tech giant getting a seat on the board.

Microsoft is OpenAI's biggest investor by far, and has now also recruited Mr Altman to lead a new artificial intelligence (AI) team.

But its strong links to OpenAI do not currently extend to its boardroom.

"At this point, I think it's very, very clear that something has to change around the governance," said Mr Nadella.

"We'll have a good dialogue with their board on that."

The Microsoft chief executive's calm demeanour in a round of media interviews is in contrast to the tumult at OpenAI itself, where staff are in open revolt at Mr Altman's departure.

They have demanded he returns and the board is fired - but exactly what is happening with the company's former chief executive is still unclear.

How OpenAI created the perfect conditions for chaos

In a dizzying series of events over the weekend, Mr Altman seemed to be about to return to OpenAI - before Microsoft swooped to hire him.

On Monday, Mr Nadella wrote on X that Mr Altman would be leading "a new advanced AI research team".

Mr Altman responded positively at the time, saying "the mission continues", but later became more cryptic when he said "we are all going to work together some way or other."

Now there are questions about whether he will actually join Microsoft after all, as almost every staff member at his former employer is grouping together to demand he and co-founder Greg Brockman be reinstated.

Evan Morikawa, an engagement manager at OpenAI, has claimed that 743 out of 770 employees at OpenAI have signed a letter calling on the board to resign - with staff themselves threatening to leave if their demands are not met.

They claim that Microsoft has told them there are jobs for all OpenAI staff if they want to join the company.

And Mr Nadella seemed to admit to CNBC that Mr Altman might not be joining, saying he was "committed to OpenAI and Sam, irrespective of what configuration".

"Obviously that depends on the people at OpenAI staying there or coming to Microsoft, so I'm open to both options," he said.

Shear moment

In the middle of all of this is Emmett Shear, the former head of Twitch who has been named the new interim head of OpenAI after Mr Altman's unceremonious exit.

The pair crossed paths years ago when they were involved with start-up investment programme Y Combinator - with a viral photo of them as part of a group spreading on social media.

The photo includes several others who went on to great careers in tech, including Aaron Swartz, a celebrated internet freedom activist and early developer of the website Reddit, who died in 2013.

Mr Shear co-founded the hit gaming site Twitch, and led it to become the dominant live-streaming website in the world, before selling the business to Amazon for an estimated $970m (£774m) in 2014.

He remained as CEO under Amazon, but left in March 2023 following the birth of his son.

But some of the tweets he has sent since leaving the firm have caused him to come under scrutiny online, including his public criticism of Microsoft.

Neither Mr Shear nor OpenAI has responded to a request for comment.

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Easily the biggest aspect of this release is the addition of official NVIDIA DLSS support, one of the most requested features by the PC community. The implementation carries the full stack of features from the tech, bringing DLSS Super Resolution, Deep Learning Anti-aliasing (DLAA), Nvidia Reflex Low Latency, and DLSS Frame generation for supported graphics cards from NVIDIA's camp.

Bethesda has mentioned previously that AMD's DLSS 3 equivalent tech, FidelityFX Super Resolution 3, will also receive support. However, no launch timeframe has been given for this GPU vendor-agnostic option's release yet.

While not a big change, Starfield players will also be able to eat or drink food they come across in the universe without having to pick them up first. Everything from Chunks to Space Ramen packs can be ingested or put in the inventory when hovering over them.

Today's update includes a whole lot of performance fixes aside from the upscaling variant too. Stealth players should also find that it's a bit easier to sneak around more without getting detected. Here are the full patch notes:

• Performance And Stability
  • Addressed a number of memory related issues and leaks.
  • Added some GPU performance optimizations, which will be more impactful on higher end cards.
  • Improved renderer threading model, improving CPU usage most notably on higher end systems.
  • Various stability and performance improvements.
• Gameplay
  • Added the ability to eat the food placed in the world.
  • Adjusted stealth to be a bit more forgiving.
  • Fixed an issue where Andreja’s head would stay permanently cloaked.
  • Fixed an issue that could prevent players from firing their weapons.
  • Fixed issues where some NPC could be seen not wearing clothes (Note: This issue may resolve itself over time).
  • Fixed an issue where already in-progress skill challenges could stop progressing after reaching the Unity and starting a new game.
  • Fixed an issue that could temporarily prevent opening the inventory or saving after entering the Unity.
  • PC: Fixed an issue where mouse movement could be choppy.
  • Fixed a rare issue that could cause the home ship to be lost.
  • Fixed an issue where the ship services technician might be missing.
  • Fixed an issue where occasionally the camera could shake incorrectly during Traveling, Grav Jumping, Docking, or Landing transitions.
• Graphics
  • Addressed an issue with how ambient occlusion appeared in ultrawide resolutions.
  • Optimized initial shader compilation that occurs on start-up.
  • Added the ability to adjust Brightness and Contrast in the Display Settings menu.
  • Added the ability to adjust HDR Brightness provided that the system supports it. (Xbox & Windows 11 only).
  • Addressed a number of materials that could sometimes present an unintended pattern under certain conditions.
  • Fixed various visual issues related to the new FOV slider options.
  • Improved the appearance of the eyes on crowd characters.
  • Addressed a number of minor visual issues related to lighting, shadows, terrain, and vegetation.
  • PC: Addressed additional visual issues related to DLSS.
• Quests
  • All That Money Can Buy: Fixed a rare issue where players couldn’t sit during the negotiation with Musgrove.
  • Blast Zone: Fixed an issue where the hard rocks that need to be cleared out by players will not appear on Ngodup Tate’s land.
  • Echoes of the Past: Fixed an issue where the Grylloba Queen could sometimes not be reachable during the objective “Secure the Shuttle Bay”.
  • Eye of the Storm: Fixed an issue where players' quest progression could potentially be blocked due to a missing docking prompt.
  • Grunt Work: Addressed an issue where progress could appear blocked if “Supra et Ultra” was completed while returning to the Lodge during “High Price to Pay”.
  • No Sudden Moves: Fixed an issue that could prevent the entrance door to the Scow ship from being opened again.
  • Operation Starseed: Fixed an issue where the key that is needed to exit the facility could sometimes not be present.
  • Sabotage: Fixed an issue where David Barron could potentially not be found by players.
  • Short Sighted: Fixed an issue where players could rarely become control-locked while speaking with Vladimir.
  • The Heart of Mars: Fixed an issue where players might not be able to mine the “The Heart of Mars”.

Starfield Update 1.8.86 is now available across PC (Steam, Microsoft Store) and Xbox Series X|S, weighing in around 15GB.

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Sources said investors are working with legal advisers to study their options. It was not immediately clear if these investors will sue OpenAI.

Investors worry that they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest startup in the rapidly growing generative AI sector.

OpenAI did not respond to a request for comment.

Microsoft (MSFT.O) owns 49% of the for-profit operating company, according to sources familiar with the matter. Other investors and employees control 49%, with 2% owned by OpenAI's nonprofit parent, according to Semafor.

OpenAI's board fired Altman on Friday after a "breakdown of communications," according to an internal memo seen by Reuters.

By Monday, most of OpenAI's more than 700 employees threatened to resign unless the company replaced the board.

Venture capital investors usually hold board seats or voting power in their portfolio companies but OpenAI is controlled by its nonprofit parent company OpenAI Nonprofit, which according to OpenAI's website was created to benefit "humanity, not OpenAI investors."

As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut. "There is nobody exactly who is in the seat of an injured investor," he said.

That is a feature, not a bug of OpenAI's structure, which started out as a nonprofit but added a for-profit subsidiary in 2019 to raise capital. Keeping control of operations let the nonprofit preserve its "core mission, governance, and oversight," according to the company's website.

Nonprofit boards have legal obligations to the organizations they oversee. But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions, experts said.

Those obligations can be further narrowed in a corporate structure such as OpenAI, which used a limited liability company as its operating arm, potentially further insulating the nonprofit's directors from investors, said Paul Weitzel, a law professor at the University of Nebraska.

Even if investors found a way to sue, Weitzel said they would have a "weak case." Companies have broad latitude under the law to make business decisions, even ones that backfire.

"You can fire visionary founders," Weitzel said. Apple (AAPL.O) famously fired Steve Jobs in the 1980s, before bringing him back around a decade later.

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That’s despite the fact that Altman announced this morning that he intended to join a newly-formed AI research team at Microsoft alongside ex-OpenAI president Greg Brockman and several former OpenAI researchers.

“Obviously, we want Sam and Greg to have a fantastic home if they’re not going to be in OpenAI,” Nadella said in an interview on CNBC. Asked whether Altman would return to OpenAI, Nadella added: “That’s for, you know, [the] OpenAI board and management and the employees to choose … [Microsoft] chose to explicitly partner with OpenAI [and] obviously that depends on the people at OpenAI staying there or coming to Microsoft, so I’m open to both options.”

Nadella’s responses seemingly confirm reporting earlier today from The Verge, which suggested that Altman’s move to Microsoft wasn’t a done deal and that — with the recent change of heart from OpenAI chief scientist Ilya Sutskever, the reported mastermind behind Altman’s departure — only two of OpenAI’s three remaining board members need to flip to bring back Altman. (Brockman was deposed as the board’s chairman on Friday, and Altman formerly held the sixth seat.)

Nadella also said that Microsoft would want to see “something change around the governance” at OpenAI going forward, including around its investor relations. (Microsoft, along with OpenAI’s other backers and most of OpenAI’s employees, are said to have been notified of Altman’s sacking “minutes” before it was made public.) OpenAI is governed by a nonprofit to which the board belongs, and investors — including Microsoft, which has poured over $10 billion into OpenAI to date  — don’t have seats on said board.

“It’s clear something has to change around the governance — we’ll have a good dialogue with their board on that, and walk through that as that evolves,” Nadella said on CNBC.

It’s been a rollercoaster at OpenAI since Altman’s firing, to say the least.

Over the weekend, OpenAI’s management team and backers — including CTO Mira Murat, who was briefly appointed interim CEO — began vetting candidates to replace the board for Altman’s possible return. Meanwhile, the board conducted its own CEO search, eventually settling on Emmett Shear, the co-founder of Twitch, after GitHub CEO Nat Friedman and Scale AI CEO Alex Wang declined offers.

Shear, who has a colorful history, turned out to be a controversial choice internally. Employees reportedly refused to attend an emergency all-hands scheduled on Sunday with Shear, responding to the announcement in OpenAI’s Slack with a “fuck you” emoji.

OpenAI’s rank-and-file, speaking of, is in widespread revolt — more than 700 of the company’s roughly 770 employees, including Sutskever, have signed a letter calling for the board to resign and reinstate Altman. Among others, Salesforce has attempted to use the unrest as a recruitment opportunity, offering matching compensation to any researcher who’s quit OpenAI to join Salesforce AI research team.

Not helping matters is the board’s reluctance to give detailed reasoning for firing Altman. Shear said in a note to employees Sunday that his first order of business would be to “hire an independent investigator to dig into the entire process leading up to this point and generate a full report.”

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It’s unclear what led to Altman’s sudden removal, but a blog post on OpenAI’s website points to transparency. “Mr. Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI.”

Altman became a household name after the release of ChatGPT last November, a time when, according to an Atlantic article, an already forming rift between two camps with different ideas of how to run OpenAI became starkly evident. “Altman’s dismissal by OpenAI’s board on Friday was the culmination of a power struggle between the company’s two ideological extremes—one group born from Silicon Valley techno-optimism, energized by rapid commercialization; the other steeped in fears that AI represents an existential risk to humanity and must be controlled with extreme caution,” Karen Hao and Charlie Warzel write in the piece.

These sentiments were echoed in an article in The New York Times, that reported another OpenAI founder and board member Ilya Sutskever “was said to be growing alarmed that the company’s technology could pose a significant risk, and that Mr. Altman was not paying close enough attention to the potential harms.” OpenAI has an unusual governance structure. It was founded as a nonprofit with a mission to make sure that its artificial intelligence never posed a threat to humanity, but later was restructured, creating a for-profit arm that took in billions of dollars in investments from Microsoft and others. Even so, the nonprofit board controlled the company and retained the mandate for safe AI that benefitted humanity.

Just in May, Altman, Brockman, and Sutskever had released a blog post advocating for governance around superintelligence, AI systems that will surpass human capabilities and intelligence. The idea is not currently grounded in research.

On Monday, Sutskever tweeted “I deeply regret my participation in the board’s actions. I never intended to harm OpenAI. I love everything we’ve built together and I will do everything I can to reunite the company.” He, along with more than 500 OpenAI employees, threatened to leave the company and join Altman in his new venture at Microsoft unless the board resigned.

On Friday, shares in Microsoft (OpenAI’s largest stakeholder) fell 1.7 percent after the firing of Altman. The software giant’s shares rose 2.1 percent, to an all-time high, on Monday after hiring Altman.

Given the speed with which things have been moving, it’s unclear who will land where in this latest game of musical tech and share value chairs. What is relatively clear, however, is perhaps instead of hysteria over individuals, it’d do everyone best to focus on responsible research and deployment of artificial intelligence technology, ensuring minimal harm to workers, the environment, and society.

“A lot of people who went crazy over the weekend for OpenAI’s governance debacle fail to realize that the recent progress in AI is neither made by one company nor by one person. Instead of wasting hours following the OpenAI shenanigans blow by blow, go rewatch the Imitation Game, to get inspired by the true hero scientists of our field!” tweeted Nasrin Mostafazadeh, AI scientist and co-founder at Verneek, an AI startup, on X.

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Microsoft CEO Satya Nadella announced late last night that former OpenAI CEO Sam Altman and OpenAI co-founder Greg Brockman were both joining Microsoft to lead a new advanced AI research team, an announcement that sent Microsoft’s stock price soaring. Now, less than 24 hours later, following The Verge reporting that Sam Altman is still trying to return as OpenAI CEO, Nadella doesn’t seem so sure.

“[We’re] committed to OpenAI and Sam, irrespective of what configuration,” said Nadella in an interview with CNBC’s Jon Fortt, adding that Microsoft “chose to explicitly partner with OpenAI [and] obviously that depends on the people at OpenAI staying there or coming to Microsoft, so I’m open to both options.” Nadella added that “obviously we want Sam and Greg to have a fantastic home if they’re not going to be [at] OpenAI, with all the colleagues at Microsoft, but I’m exactly where I was on Friday morning.”

On Friday morning Nadella woke up with Sam Altman still OpenAI CEO and a close partnership with the company. Hours later the OpenAI board chose to fire Sam Altman in a shock decision, and it sure sounds like Nadella wishes he could hit the reset button back to Friday morning.

Pressed on whether Altman and the hundreds of OpenAI employees threatening to resign will actually join Microsoft, Nadella responded “that is for OpenAI board and management and the employees to choose,” before explaining Microsoft already has its own AI capabilities, a message clearly meant to calm jittery investors and worried OpenAI customers.

In an interview with Bloomberg TV just moments later, anchor Emily Chang tried to get more out of Nadella on the Altman and Brockman hiring announcement. Are they actually Microsoft employees? “So they’re all in the process of joining,” replied Nadella, before quickly pivoting to talking about Microsoft’s own AI work again.

Reading between the lines of these strained interviews, it’s clear Nadella wants what Altman and hundreds of OpenAI employees want: the OpenAI board gone. He didn’t explicitly say that, but he was more willing to talk about board changes to Bloomberg TV than the potential for Sam Altman to be an actual Microsoft employee:

I think we will definitely want some governance changes. Surprises are bad and we just want to make sure that things are done in a way that will allow is to continue to partner well. This idea that somehow suddenly changes happen without being in the loop is not good and we will definitely ensure that some of the changes that are needed happen and we continue to be able to go along with the partnership with OpenAI.

I reported earlier today that Sam Altman isn’t showing up in Microsoft’s corporate directory yet, according to multiple sources. That’s not hugely surprising as Microsoft’s HR and onboarding processes aren’t set up for 24-hour emergency deals, but Microsoft also hasn’t detailed the appointment to employees in any internal company-wide memos yet. If Altman is fully onboarded to Microsoft then he’ll have a CEO title inside Microsoft, which is typically reserved for the leaders of big divisions like Microsoft Gaming, or acquired companies like LinkedIn and GitHub.

So Sam Altman looks set to continue to be a CEO. The question still remains whether that’s at Microsoft, or OpenAI.

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Sam Altman’s surprise move to Microsoft after his shock firing at OpenAI isn’t a done deal. He and co-founder Greg Brockman are still willing to return to OpenAI if the remaining board members who fired him step aside, multiple sources tell The Verge.

Update 6:18PM ET: Microsoft CEO Satya Nadella appeared on CNBC and Bloomberg TV tonight. Asked directly by CNBC’s Jon Fortt if Sam Altman would be a Microsoft employee and the 700 OpenAI staffers would join him at the company, Nadella said only “that is for the OpenAI board and management and employees to choose.” He followed by saying Microsoft “chose to explicitly partner with OpenAI [and] obviously that depends on the people at OpenAI staying there or coming to Microsoft, so I’m open to both options.”

Asked if Microsoft needs a seat on OpenAI’s board, he said on CNBC “it’s clear something has to change around the governance — we will have a good dialogue with their board on that, and walk through that as that evolves.” On Bloomberg, he told Emily Chang that “surprises are bad” and Microsoft will “definitely want some governance changes. This idea that changes happen without being in the loop is not good.”

Asked directly by Chang who OpenAI’s CEO would be tomorrow, Nadella only laughed and said “I will leave it with OpenAI and its board.”

Here’s the rest of our original story:

The promised mass exodus of virtually every OpenAI employee — including board member and chief scientist Ilya Sutskever, who led the initial move to depose Altman! — means that there is more pressure on the board than ever, with only two of the three remaining members needing to flip.

Altman posted on X that “we are all going to work together some way or other,” which we are told is meant to indicate that the fight continues.

Altman, former president Brockman, and the company’s investors are still trying to find a graceful exit for the board, say multiple sources with direct knowledge of the situation. The sources characterized the hiring announcement by Microsoft, which needed to have a resolution to the crisis before the stock market opened on Monday, as a “holding pattern.”

A spokesperson for Microsoft declined to comment.

After Altman was suddenly fired on Friday, negotiations with the board to potentially bring him back reached a stalemate. While OpenAI’s management team and investors were vetting candidates to replace the board for Altman’s potential return, the board was quietly conducting its own CEO search in parallel. Late Sunday, the board announced that Emmett Shear, the co-founder of Twitch, would be CEO, seemingly putting an end to the possibility of Altman coming back.

There has been a nonstop power struggle inside OpenAI since Friday, with nearly all employees against the now three-person board that opposes Altman. Employees at the company’s San Francisco headquarters refused to attend an emergency all-hands scheduled on Sunday with new CEO Emmett Shear, according to a person familiar with the matter, who added that they responded to the announcement in OpenAI’s Slack with a “fuck you” emoji.

Later that evening, Sutskever flipped on the board, even though he had played a key role in the ousting of Altman just days earlier. His name was on an open letter to the board on Monday calling for them to resign and reinstate Altman, which nearly the whole company has now signed.

On Monday, employees started posting on social media that they are continuing to keep the lights on and maintain service stability for OpenAI’s developers, which we’re told is being done to ensure the company doesn’t fully implode while the board is pressured to resign.

New CEO Emmett Shear has so far been unable to get written documentation of the board’s detailed reasoning for firing Altman, which also hasn’t been shared with the company’s investors, according to people familiar with the situation. He said in a note to employees Sunday night that his first order of business would be to “hire an independent investigator to dig into the entire process leading up to this point and generate a full report.”

Moments after this story was first published, Altman said in another X post that his “top priority remains to ensure openai continues to thrive,” and that he and Microsoft “are committed to fully providing continuity of operations to our partners and customers.”

It’s not clear how going to Microsoft with over 700 former OpenAI employees is compatible with ensuring OpenAI continues to thrive, or how that can be reasonably set as a priority for those former employees once they are working at Microsoft. Also: Altman is not in Microsoft’s internal corporate directory yet.

The remaining board holdouts who oppose Altman are Quora CEO Adam D’Angelo, former GeoSim Systems CEO Tasha McCauley, and Helen Toner, the director of strategy at Georgetown’s Center for Security and Emerging Technology. They have so far not responded to The Verge’s requests for comment.

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Also:  Believe it or not, Sam Altman might actually return to OpenAI as its CEO

Just after 2 am Pacific time on Monday morning, several OpenAI staffers—including its chief technology officer, Mira Murati—posted in unison on X: “OpenAI is nothing without its people.” Sam Altman, who was dramatically removed as the company’s chief executive on Friday, reposted many of them. By then, Altman already had a new job. Satya Nadella—CEO of Microsoft, a major investor and partner of OpenAI—announced late on Sunday night that Altman and his cofounder Greg Brockman would be joining the tech giant to head a new “advanced AI research team.” Nadella’s statement seemed to suggest that others from the startup would be joining Microsoft.

By hiring Altman and Brockman amid the chaos at the top of OpenAI, Microsoft has managed to acquire one of the most successful management teams in artificial intelligence without having to buy the company—whose pre-chaos valuation was $86 billion.

“Satya now looks like one of the most epic kingmakers,” says Nathan Benaich, founder and general partner at Air Street Capital and author of the State of AI report.

At least three other senior researchers—Jakub Pachocki, Aleksander Mądry, and Szymon Sidor—have reportedly left OpenAI.

“The head and the arms and one of the legs [of OpenAI] have gone to Microsoft,” says tech analyst Azeem Azhar, author of the newsletter Exponential View. “This is an enormous opportunity for Microsoft because it gets to take Sam Altman and Greg Brockman and probably a large part of the leadership team, and many of the very best engineers and researchers.”

At Microsoft, Altman and Brockman will have access to huge amounts of capital and compute power, Azhar says, as well as the tech giant’s support to develop other parts of the AI tech stack, including chips and consumer electronics. Altman was reportedly trying to raise billions of dollars from investors for a new chip project in the weeks running up to his firing. Altman and OpenAI had also been linked to a hardware venture with former Apple head of design Jony Ive that was reportedly hoping to build the “iPhone of AI,” backed by Softbank’s Masayoshi Son.

“I’m sure [Microsoft] will give Sam the leeway to go up and down the stack,” Azhar says. “Microsoft itself is developing its own chips for AI. Well, Altman’s group can probably help with that now, and they will be developing consumer electronics like surface computers and so on. Sam can start to head into that direction now through this group.”

Microsoft shares slipped on Friday as news of the problems at OpenAI spread. OpenAI’s technology has been integrated into a number of Microsoft products, including its Bing search engine, and the two companies’ fortunes had been seen as deeply intertwined. The news that Altman will be moving to the company is likely to restore confidence, analysts say.

“[Microsoft] hired this key asset and now he will oversee OpenAI from Redmond along with Nadella which is music to the ears of investors,” Dan Ives, senior equity research analyst covering the technology sector at Wedbush Securities, said in an email. “If Microsoft lost Altman he could have gone to Amazon, Google, Apple, or a host of other tech companies craving to get the face of AI globally in their doors. Instead he is safely in Microsoft’s HQ now leading the company’s key AI efforts.”

In an increasingly competitive AI industry, this is more than just steading the ship after a chaotic few days for Microsoft. “Microsoft would never have thought they would get this level of talent, right? And especially at the senior level,” says Imran Ghory, general partner at VC Blossom Capital.

What it means for OpenAI isn’t clear, but the weekend’s events have also punctured a pervasive myth that the company’s lead in the industry is bulletproof. “The weekend’s chaos has shown us that no one is immune from the laws of corporate physics. Considering Sam’s centrality, it’s the most baffling decision from an AI lab I’ve witnessed,” he says. “People who are investing in OpenAI took the view that it was invincible. History teaches you that no one is invincible.

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In the middle of all this, OpenAI ditched its first interim CEO, Mira Murati, and put in former Twitch CEO Emmett Sheer late on Sunday night in the new leadership role. This morning, Sheer posted a lengthy message on his X (formerly Twitter) account to offer up some more info on what OpenAI will do next.

Sheer stated that even with Altman and other OpenAI team members jumping ship to join Microsoft, he wrote, "Our partnership with Microsoft remains strong." However, Sheer admitted that there were problems with how the company chose to cut ties with Altman on Friday:

. . . it’s clear that the process and communications around Sam’s removal has been handled very badly, which has seriously damaged our trust.

He also wrote that the board did not remove Altman "over any specific disagreement on safety, their reasoning was completely different from that."

Sheer wrote that as OpenAI's new CEO he has a three-point plan for the next 30 days. One of them is to "hire an independent investigator to dig into the entire process leading up to this point and generate a full report." He also plans to "speak to as many of our employees, partners, investors, and customers as possible" and finally he says he will "reform the management and leadership team." Sheer says that, based on what he learns in the next 30 days, there could be big changes at OpenAI including "significant governance changes if necessary"

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OpenAI has imploded. Satya Nadella has somehow masterfully navigated this weekend’s wild events and has ended up with the core OpenAI research team absorbed into Microsoft.

And we’re extremely excited to share the news that Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team.

Satya Nadella

To quickly recap for those who weren’t caught in the drama loop and enjoyed their weekends, Sam Altman (CEO) was fired by OpenAI’s board for vague reasons. This was done without the board discussing their decision with any of OpenAI’s investors, including Microsoft. Greg Brockman (Chairman and President) was also kicked off the board and demoted. He subsequently quit in revolt. The OpenAI board, which has no legal obligation to shareholders or really to anything besides AI safety, has had plenty of opportunity to explain their drastic actions, but they have not done so thus far, even internally. Multiple other key leaders on GPT-4 and GPT-5 such as Jakub Pachocki and Szymon Sidor have also quit.

Mira Murati, the CTO, was appointed as the interim CEO. On Saturday night, in what we are calling the night of a hundred hearts, most OpenAI employees, including Mira, publicly gave their support to Sam and Greg. The employees and Microsoft wanted Sam back.

On Sunday, there were negotiations to rejoin the firm, but in the end the board decided against it. Instead appointed as CEO Emmett Shear, the founder and long-time CEO of Twitch.tv. Emmett Shear has publicly stated he wants to significantly slow down AI progress.

Sam and Greg were considering creating a brand-new startup, but that would have likely caused a >1 year speed bump. Instead, now there is a new subsidiary within Microsoft.

I’m super excited to have you join as CEO of this new group, Sam, setting a new pace for innovation. We’ve learned a lot over the years about how to give founders and innovators space to build independent identities and cultures within Microsoft, including GitHub, Mojang Studios, and LinkedIn, and I’m looking forward to having you do the same.

Satya Nadella

There is a mass exodus of the core OpenAI team leaving and joining Microsoft. This new organization within Microsoft will get hundreds of technical staff from OpenAI.

Incentive Structures

The OpenAI for-profit subsidiary was about to conduct a secondary at a $80 billion+ valuation. These “Profit Participation Units” (PPUs) were going to be worth $10 million+ for key employees. Suffice it to say that this is not going to happen now, and the OpenAI board has foolishly destroyed the chance of generational wealth for many of the team. Despite this literal fumbling of the bag, key OpenAI employees who leave will be treated extremely well.

Part of Satya’s incredible deal with Sam and Greg is likely that these key OpenAI employees that join Microsoft will have their now worthless PPUs pseudo-refreshed for equity in Microsoft which vest over multiple years. There will be compensation packages that are $10 million plus ($1e7+) for those who were with OpenAI for multiple years.

There is likely also a huge incentive-based pay for all the huge bets and risks this new team will be making, which will align and incentivize the OpenAI team to do what they do best, accelerate.

The narrative that risk takers chasing generational wealth won’t want to join Microsoft and instead chase the start-up life is quite moot. There is a possibility that this subsidiary may also be allowed to grant its own equity to employees in a form that is not directly Microsoft stock.

Compute Is King

Microsoft had previously placed huge bets on OpenAI, with plans for >$50B annual datacenter spend to race to AGI and deploy their GPT-4 based copilot products. Our data shows one of OpenAI’s next training supercomputers in Arizona was going to have more than 75,000+ GPUs in a singular site by the middle of next year.

Our data also shows us that Microsoft is directly buying more than 400,000 GPUs next year for both training and copilot/API inference. Furthermore, Microsoft also has tens of thousands of GPUs coming in via cloud deals with CoreWeave, Lambda, and Oracle.

There are a few big question marks on what OpenAI has guaranteed. Most of the Microsoft investment in OpenAI is in the form of compute credits. While there are agreements on the sizes of supercomputers that must be delivered, we believe Microsoft was on track to blow way past those goals and deliver OpenAI more than legally required, meaning a rebalancing is possible.

Microsoft can likely claw back or not deliver quite a bit of what it had planned for OpenAI. These compute resources can be routed to the new internal team. Furthermore, given how killer Microsoft’s legal team is, it’s possible that an even large portion of what is already delivered or soon to be delivered can be clawed back.

If the new team were to spin out and make their own startup, they would have had tremendous difficulty acquiring enough compute to build a GPT-5 scale model before Anthropic or Google. Given there is a sort of runaway escape velocity here, this would put them at a huge disadvantage in the race to AGI. By joining Microsoft, the former OpenAI team will still have access to the necessary compute resources next year.

It is very likely that this development accelerates spending further and Microsoft’s orders for GPUs will have to go up yet again in order to fulfill the OpenAI contract and give the new company everything they need to build GPT-5 next year.

Intellectual Property

Within a few hours of Sam being fired, Satya minced no words in his tweet “supporting” OpenAI’s new leadership. It was effectively a thinly veiled threat that said “I don’t need you.” (which he doesn’t for copilot deployment)

We have a long-term agreement with OpenAI with full access to everything we need to deliver on our innovation agenda and an exciting product roadmap

Satya Nadella, Microsoft CEO

Microsoft has full legal rights and access to the weights of the base GPT-4 model as well as the various fine-tuned versions and DALL-E 3.

If the team went down the startup path, they would have had to spend significant time rebuilding GPT-4. Instead, at Microsoft they will have access to much of the IP they require for future products.

What’s more important to understand is if Microsoft has legal direct access to all the data and code used for pre-training and RL. It is obviously all stored on Azure, but if the new Sam-led internal team can freely access that, they can basically start exactly where they left off without much of a hiccup. If they cannot get it, then we estimate that it could possibly lead to only a 4-6 month delay vs prior. While this small of a delay sounds insane to say... Talent is everything.

OpenAI Silicon

The silicon efforts at OpenAI are effectively dead now without Sam and certain key individuals. Those efforts were completely independent of the efforts at Microsoft regarding which we detailed specifications, performance, and more here.

These plans are far more immediate and realizable now inside the Microsoft subsidiary.

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Hey Everyone,

AI is eating itself.

More than 5 years after the paper by Google researchers that would transform the world, we are now at a crossroads.

Sam Altman’s exit from the CEO of OpenAI to Microsoft is a case in point.

Amid rumors of AI eating its own tail, Sam Altman and his loyalists going to an advanced AI research team within Microsoft sounds like a major exodus of talent and senior leadership in OpenAI, and maybe the end of its ability to get Billions of dollars in funding.

While some are calming it’s a great victory of Satya Nadella, I’m not so sure. Cannibalizing your biggest investment doesn’t usually turn out very well. Just one year after ChatGPT launches and Generative A.I. consolidation is already occurring? Given the moves of Inflection, Anthropic and Character.AI, BigTech was already at the doorstep of these startups.

The Beginning of the End of OpenAI

But with OpenAI being torn in half, it seems like independent startups in Generative A.I. really cannot survive or keep up on their own, which means real innovation may be stunted.

BigTech have eaten LLMs and after all the GPTs and copilots can we say the world is in better hands or in a better place?

With scars from the heyday of other hype cycles, Silicon Valley cronies in their Venture Capital towers don’t care about innovation, they just want to profit and Generative A.I. seems stuck in this loop.

While some will praise Satya Nadella and hero-worship Sam Altman, breaking OpenAI into two parts will slow down momentum for LLMs and research while handing even more power to the Cloud and Azure in its future.

If AI-generated content is beginning to fill the internet, and that could be bad news for future AI models, AI startups are already being eaten by Silicon Valley even before they reach their best years.

Microsoft taking Sam Atman and his followers in, is like shutting down your best investment just for a short-term benefit. These stories don’t usually end well for big corporations.

It’s the job of Venture Capitalist to praise Microsoft, Satya Nadella, and Sam Altman to vilify OpenAI’s board in all of this. But don’t mistake that as the truth. Microsoft eating OpenAI and poaching their talent, is the worst possible scenario for the startup that was just beginning to get momentum.

Satya Nadella tried to negotiate and gave Sam Altman and Greg Brackman offers they couldn’t refuse. Unfortunately the result doesn’t have a high likelihood of success. Betting on breaking up a startup that you’ve spent over $13 Billion on is a choice that will grow to haunt Microsoft for years and decades to come.

Microsoft inviting Sam Altman to lead an internal advanced R&D Lab, is how to ignite the fall of OpenAI. BigTech pressuring the consolidation of Generative A.I. startups prematurely could stunt the entire progress of LLMs and allow China to catch up.

This is what happens when free market capitalism and anti-competitive rules are absent from your system. Silicon Valley has prioritized the wrong incentives for A.I. to blossom organically in the 2020s.

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OPENAI WAS IN open revolt on Monday with 505 employees signing an open letter threatening to leave unless the board resigns and reinstates Sam Altman as CEO, along with cofounder and former president Greg Brockman. Altman was controversially fired by the board on Friday.

“The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardized all of this work and undermined our mission and company” the letter reads. “Your conduct has made it clear you did not have the competence to oversee OpenAI.”

Remarkably, the letter’s signees include Ilya Sutskever, the company’s chief scientist and a member of its board, who has been blamed for coordinating the boardroom coup against Altman in the first place.

Shortly before the letter was released, Sutskever posted on X: "I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together and I will do everything I can to reunite the company.|

The letter’s release follows an extraordinary, head-spinning weekend in Silicon Valley. OpenAI’s board removed Altman from his position on Friday, claiming “he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.”

Mira Murati, OpenAI’s chief technology officer, was appointed as interim CEO.

After blowback from investors including Microsoft, OpenAI’s board seemed open to having Altman return to lead the company. Altman posted a photo of himself wearing a visitors’ badge at the company’s headquarters on Sunday. But last night, the board told staff that Altman would not be returning to the company.

Hours later, Microsoft CEO Satya Nadella announced that Altman and Brockman would be joining the tech giant to head a new advanced AI research unit.

Nadela appeared to leave the door open to any OpenAI employees eager to jump ship, adding of Altman’s new Microsoft subsidiary: “We look forward to moving quickly to provide them with the resources needed for their success.”

In another rapid-fire reshuffle, OpenAI’s board chose to remove Murati and appoint another interim CEO, Emmett Shear, the former CEO of the video game streaming site Twitch.

Some OpenAI staff stayed up all night debating a course of action following news that Altman would not return to OpenAI. Many staff were frustrated about a lack of communication over Altman’s firing. Dozens of employees appeared to signal their willingness to jump ship and join Altman last night by posting “OpenAI is nothing without its people.” on X.

In their letter, the OpenAI staff threaten to join Altman at Microsoft. “Microsoft has assured us that there are positions for all OpenAI employees at this new subsidiary should we choose to join," they write.

The precise reason for Altman’s removal remains unclear, even to many inside the company. “Despite many requests for specific facts for your allegations, you have never provided any written evidence,” the letter says in its message to the board.

Besides calling for the current board, made up of Ilya Sutskever, Adam D’Angelo, Helen Toner, and Tasha McCauley, to resign, the letter requests that two new independent lead board members, Bret Taylor and Will Hurd, be appointed. Taylor is a tech industry veteran with close ties to Altman; Hurd is a politician who previously served on the OpenAI board.

The letter raises the very real prospect of OpenAI losing almost all of its staff, and Microsoft essentially acqu-ihiring the entire company. OpenAI has around 770 total staff, per the Wall Street Journal.

The wild saga also highlights OpenAI’s unusual governance structure, which gave a few non-profit board members extraordinary power of the hottest tech company in the world.

The episode also reveals how divisive the race to develop artificial intelligence has become among many involved with developing the technology.

Altman’s efforts to raise money for OpenAI, and to turn its offerings into commercial products, may have unsettled board members who saw their responsibility as ensuring that AI is developed safely.

The letter reads:

To the Board of Directors at OpenAI,

OpenAI is the world’s leading AI company. We, the employees of OpenAI, have developed the best models and pushed the field to new frontiers. Our work on AI safety and governance shapes global norms. The products we built are used by millions of people around the world. Until now, the company we work for and cherish has never been in a stronger position.

The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardized all of this work and undermined our mission and company. Your conduct has made it clear you did not have the competence to oversee OpenAI.

When we all unexpectedly learned of your decision, the leadership team of OpenAI acted swiftly to stabilize the company. They carefully listened to your concerns and tried to cooperate with you on all grounds. Despite many requests for specific facts for your allegations, you have never provided any written evidence. They also increasingly realized you were not capable of carrying out your duties, and were negotiating in bad faith.

The leadership team suggested that the most stabilizing path forward - the one that would best serve our mission, company, stakeholders, employees and the public - would be for you to resign and put in place a qualified board that could lead the company forward in stability.

Leadership worked with you around the clock to find a mutually agreeable outcome. Yet within two days of your initial decision, you again replaced interim CEO Mira Murati against the best interests of the company. You also informed the leadership team that allowing the company to be destroyed “would be consistent with the mission.”

Your actions have made it obvious that you are incapable of overseeing OpenAI. We are unable to work for or with people that lack competence, judgement and care for our mission and employees. We, the undersigned, may choose to resign from OpenAI and join the newly announced Microsoft subsidiary run by Sam Altman and Greg Brockman. Microsoft has assured us that there are positions for all OpenAI employees at this new subsidiary should we choose to join. We will take this step imminently, unless all current board members resign, and the board appoints two new lead independent directors, such as Bret Taylor and Will Hurd, and reinstates Sam Altman and Greg Brockman.

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Also:  Over half of OpenAI's employees may quit unless the board leaves and brings Sam Altman back.

In a letter, they question the board's competence, and accuse it of undermining the firm's work.

Senior staff are among the many signatories.

The sacking on Friday of Mr Altman, one of the leading figures in artificial intelligence (AI), shocked the tech world.

One of the board members involved in his dismissal, OpenAI's chief scientist Ilya Sutskever, has said on X, formerly Twitter, that he made a mistake.

"Now I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together and I will do everything I can to reunite the company", he posted.

Mr Sutskever has signed the letter calling for the board - on which he sits - to be dismissed.

In a fast moving and chaotic series of events over the weekend it seemed briefly that Mr Altman might get his job back, only for it to be announced he was joining Microsoft, a major funder of OpenAI.

Microsoft chief executive Satya Nadella wrote on X, that Mr Altman would be leading "a new advanced AI research team".

Meanwhile, ex-Twitch CEO Emmett Shear will become OpenAI's new interim boss.

Writing on X, he called the job a "once-in-a-lifetime opportunity".

But he added the way Mr Altman had been sacked was "handled very badly" and "seriously damaged our trust".

Mr Altman, 38, helped launch the firm - best known for creating the popular ChatGPT bot - and has become one of the most influential figures in the fast-growing generative artificial intelligence (AI) space.

The sacking of such a high profile figure surprised industry watchers, and angered many in the company he'd led - culminating in them demanding the board members resign.

Responding to the post by Microsoft boss Mr Nadella confirming his new job, but before the letter was published, Mr Altman posted "the mission continues".

'Embarrassing circus'

Dan Ives of investment firm Wedbush Securities says Microsoft has ended up being strengthened - but the episode reflected badly on OpenAI.

They were "at the kid's poker table and thought they won until Nadella and Microsoft took this all over in a World Series of Poker move for the ages", he wrote.

"The embarrassing circus show over the weekend at OpenAI was finally taken over by the adults in the room."

Emmett Shear was the former boss of video-sharing platform Twitch

OpenAI's new boss Emmett Shear is the former head and co-founder of video streaming service Twitch. A memo to OpenAI's staff said he had a "unique mix of skills, expertise and relationships that will drive OpenAI forward".

In spite of now being at the helm of one of the world's most powerful AI companies - and being a self-described "techno-optimist" - Mr Shear has expressed concerns about what he sees as the potential existential threat posed by the technology.

"It's like someone invented a way to make 10x [ten times] more powerful fusion bombs out of sand and bleach, that anyone could do at home", he told the Logan Bartlett Show podcast in June.

The exact reasons for Mr Altman's sacking by the board remain unclear.

On Friday, when OpenAI announced it was firing Mr Altman, it accused him of not being "consistently candid in his communications with the board, hindering its ability to exercise its responsibilities" - but did not specify what he is alleged to have not been candid about.

Mr Shear has addressed some of the speculation on the subject.

"The board did *not* remove Sam over any specific disagreement on safety, their reasoning was completely different from that. I'm not crazy enough to take this job without board support for commercializing our awesome models", he wrote on X.

The mention of safety could suggest that this was not a disagreement about the management of the risks AI may pose, though the words are open to interpretation.

But Mr Shear committed to hiring an independent investigator "to dig into the entire process".

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What you need to know

• Microsoft has announced that is it hiring Sam Altman, ex-CEO of OpenAI.
• Altman was fired by OpenAI last week after the board said they had lost confidence in his leadership.
• Altman will be joined by Greg Brookman to lead a new AI research team at Microsoft.

Microsoft CEO Satya Nadella has announced in a post on X that the company is hiring Sam Altman, previously CEO at OpenAI to lead a new AI research team alongside Greg Brookman, co-founder of OpenAI. 

The news comes after a whirlwind weekend of news, which started on Friday when Sam Altman was fired by OpenAI's board of directors. The board says they lost confidence in Altman's leadership, which lead to him being fired and Brookman stepping down as president at OpenAI.

Nadella's statement on Microsoft's current partnership with OpenAI, and the hiring of Altman and Brookman said the following:

"We remain committed to our partnership with OpenAI and have confidence in our product roadmap, our ability to continue to innovate with everything we announced at Microsoft Ignite, and in continuing to support our customers and partners. We look forward to getting to know Emmett Shear and OAI's new leadership team and working with them. And we’re extremely excited to share the news that Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team. We look forward to moving quickly to provide them with the resources needed for their success."

OpenAI has appointed two interim CEOs in the last two days after it fired Altman on Friday, starting with Mira Murati, before former Twitch CEO Emette Sheer took over as OpenAI's interim CEO this morning. OpenAI's board of directors were considering reinstating Altman after it was reported that Microsoft was unhappy with the decision to oust him.

However, it appears the board remains committed to its decision, and has placed Sheer in the CEO chair instead of reinstating Altman. As a result, Microsoft has chosen to hire Altman for their own AI research team, with Brookman joining along with other colleagues.

Developing...

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Starlink Standard terminal

Image: SpaceX

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Valve released a 25th-anniversary version of Half-Life on Friday, and you can claim it for free on Steam until Monday, November 20. It not only has some new content like some extra multiplayer maps, but it also has some content that was either cut from the game or released in other forms and was not readily available until now. Even if you have played Half-Life in the past, or perhaps the fan-created Source 2 engine-based recreation of the game, Black Mesa, getting this new update is worth it.

Valve also released a new 1-hour documentary that features a lot of Valve's current and former employees talking about the creation of Half-Life. Among other things, it talks about Valve's formation in 1996 by two ex-Microsoft employees, Gabe Newell and Mike Harrington. In this archived Computerandvideogames.com interview, Newell notes that he joined Microsoft back in the early 1980s, when it was a much smaller company that it eventually became.

Newell worked as the producer on the first three versions of Windows and ended up becoming one of the first Microsoft millioniares. When id Software released Doom, and its shareware version was installed on tons of PCs in the early 1990s, Newell was so impressed, that he contacted id Software's John Carmack and volunteered to port Doom to Windows for free.

Newell then wrote:

During the course of Quake development, a friend of mine at Microsoft moved to id to work with John [Carmack] on Quake - he was one of Carmack's programming heroes. So he'd gone from Microsoft to id and the two of them said to myself and Mike Harrington, another Microsoft employee, 'Hey, you guys should stop working at Microsoft and start a games company'.

 

We went down there, must have been the summer of 1996, and bounced around some ideas with John and he said 'Great, here's the source code to Quake, go build a game'.

 

Mike and I looked and each other and said, 'Well I guess we're going to start a games company now'. That's how we got started.

Newell and Harrington assembled their development team in their offices in Kirkland, Washington, and began developing Half-Life. It also secured a publisher for the game, Sierra Online. In May 1997, when the Electronic Entertainment Expo was held in Atlanta, Georgia, I managed to get a press pass and an invite to Sierra's E3 event where the publisher showed off Half-Life to the public for the first time.

I remember being blown away by the very different art style and look that Half-Life had compared to a lot of other first-person shooters that had been released at that time. The creatures, like the Bullsquid and the Barnacle, looked unlike any other enemies in FPS titles, and Valve's use of skeleton animation made them move in new and strange ways. I knew back then that this would be a game that would be a new landmark in the FPS genre.

The plan was for Valve and Sierra to release Half-Life in November 1997, but as chronicled in Geoff Keighley's excellent GameSpot feature The Final Hours of Half-Life, Valve took a step back in September 1997 as it felt that the game was not actually fun to play. The game's release was postponed and a lot of work was dumped to try to make Half-Life a more entertaining game.

In short, that postponement worked, and when Valve released Half-Life 25 years ago today, it became a massive critical and sales hit. I remember installing the game on my Gateway Pentium PC and being sucked into the game's storyline. This game didn't feel like just a series of interconnected levels but a real setting where, as second-level scientist Gordon Freeman, I was fighting for my life after the experiment at Black Mesa turned into a disaster.

The creatures and humans I had to deal with had advanced AI (for the time) that made them harder to defeat, and the overall story of the invasion from Xen was engaging. I also put in hours and hours of time playing in its multiplayer mode.

Half-Life is still considered to be among the greatest video games of all time. It's also mostly a PC game released for Windows, Mac OS X, and Linux. The only console port that was released was for the PlayStation 2 several years later (a Sega Dreamcast port was canceled only a few weeks before it was planned to launch). Perhaps with this new 25th-anniversary version, Valve might want to consider releasing it for modern-day consoles.

The success of Half-Life was also only the tip of the spear when it came to Valve's success. Over the next 25 years, it would not only develop and release a series of highly successful games, but its launch of the Steam digital PC game store would basically save the entire PC game industry in the mid-2000s. More recently, the launch of the Steam Deck showed that portable PC gaming could also be successful. That's not bad for a company formed by two ex-Microsoft team members with no prior gaming experience.

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Table of contents:

1. Microsoft Ignite 2023
2. Windows 11 news
3. Updates are available
4. Gaming news
5. A blast from Microsoft's past
6. Random fact about Microsoft

Microsoft Ignite 2023

Here is what Microsoft announced during its annual Ignite conference. Although most of those announcements targeted developers and enterprise customers, some changes will also affect regular customers.

For starters, we have two new in-house chips from Microsoft; just do not expect to see them in the next Surface Pro. The Microsoft Azure Maia AI Accelerator and Microsoft Azure Cobalt will speed up Microsoft's AI workloads, bringing customers faster AI experience across different products. Microsoft plans to roll out the new chips to existing infrastructure early next year.

Microsoft also unveiled a new "Windows App" for managing connected devices and applications via Windows 365, Azure Virtual Desktop, Remote Desktop, Remote Desktop Services, and Microsoft Dev Box. The app is now available for download in preview from the Microsoft Store.

As expected, Copilot received a lot of attention during Microsoft Ignite 2023. The company renamed Bing Chat and Bing Chat Enterprise to just Copilot and Copilot Pro, plus announced Copilot for Sales and Copilot for Service. In addition, multi-modal GPT-4 Turbo is coming soon to Azure OpenAI Service and Azure AI Studio to support different input formats, such as text, images, and more.

Other notable announcements include the following:

• A new version of Microsoft Planner is coming in Spring 2024.
• Microsoft Clipchamp is now available for Microsoft 365 commercial customers.
• Microsoft Loop is now generally available, with new features in preview.
• Microsoft Teams to get more capabilities, such as immersive spaces and background decoration.

Windows 11 and 10

Here we talk about everything happening around Microsoft's latest operating system in the Stable channel and preview builds: new features, removed features, controversies, bugs, interesting findings, and more. And of course, you may find a word or two about older but still supported versions.

As expected, Microsoft released Patch Tuesday updates for Windows 11 and 10, bringing users the latest fixes, improvements, and security patches. In addition, the update finally brings the Moment 4 update features to all Windows 11 users.

• Windows 11 version 22H2 and 23H2: KB5032190, build numbers 22621.2715 and 22631.2715.
• Windows 10 version 22H2: KB5032189, build numbers 19044.3693 and 19045.3693.

In addition to releasing the latest updates, Microsoft announced that Windows 11 version 22H2 would no longer receive optional non-security updates. That does not mean the operating system is no longer supported, though. It will continue receiving monthly updates with fixes and security patches. Additional non-security updates will be only available for Windows 11 version 23H2 users.

Although every update makes Windows 10 and 11 slightly better, troubles and bugs still happen. Microsoft confirmed the 8007000D error on Windows 10 and acknowledged activation issues following the recent ban of old Windows 7 and 8/8.1 keys.

Microsoft also announced that Steps Recorder, an old troubleshooting utility from the Windows 7 era, is now deprecated. That means it will no longer receive new updates, and Microsoft will remove the app from Windows at some point in the future.

Finally, the company fixed its Media Creation Tool app, allowing users to download Windows 11 version 23H2 images for clean installations or in-place upgrades.

More features for Windows 10

In a surprising move, Microsoft announced some new features for Windows 10. Copilot, Microsoft's newest AI-powered assistant, is coming soon to Windows 10 users, and you can already try it in the latest Release Preview update. Since the rollout is staggered, you may need to force-enable Copilot in Windows 10 using our short guide.

Besides, the update introduces a new Windows Update toggle that lets you get the latest non-security updates as soon as they are available.

But hey, there is more! Windows 11's latest Release Preview update contains several EEA-compliant changes that let you uninstall Microsoft Edge, decouple Bing from the operating system, and more. Although those changes are only officially applicable to EU citizens, you can apply them to your Windows 11 PC using this guide. In addition to Windows 11, those changes will soon be available in Windows 10.

Windows Insider Program

• Server vNext: 25997 with SMB over QUIC in more editions.
• Canary Channel: 25997 with minor improvements and fixes.
• Dev Channel: 23590 with File Explorer fixes, more natural voices for Narrator, and more.
• Beta Channel: 22635.2771 with Snipping Tool, Narrator, and other updates.
• Release Preview: 22631.2787 and 22621.2787 for Windows 11 with EEA-compliant changes.
• Release Preview: 19045.3754 with Copilot, the new update toggle, and more.

Besides fresh preview builds, Microsoft released some app updates for Windows Insiders. They can try a new version of the Microsoft Photos app with the background removal and replacement tool, plus a slightly tweaked photo viewing user interface. Those changes are available in version 2023.11110.8002.0.

In addition, Canary build 25997 contains a new button to let users refresh the list of available Wi-Fi networks. Microsoft confirmed the change but said the button needs more work, so expect more news in upcoming updates.

Updates are available

This section covers software, firmware, and other notable updates (released and coming soon) delivering new features, security fixes, improvements, patches, and more from Microsoft and third parties.

Recently launched in preview, the new Outlook app for Windows has already received plenty of tough love from users for the lack of features. Even though Microsoft promised to address the missing capabilities problem, the app keeps giving users more reasons to hate it. As it turned out, the app wants to send your non-Microsoft-related data to the company to "enhance your Microsoft 365 experience in New Outlook for Windows."

Moving to more positive updates, here is Copilot and its new shopping capabilities. Just in time before the holiday season and the scheduled shopping spree, Microsoft launched new shopping tools in Copilot to help customers better spend their dollars. The company says customers can ask Copilot for shopping ideas or even give the AI a picture of what they want.

The Microsoft Store app also received some love from developers. The latest update lets customers specify where the app should install the selected game.

In addition, Microsoft launched the Microsoft Forms app for Windows 11. You can create forms and quizzes, use AI-suggested questions, customize forms with themes, and distribute forms within the app. Microsoft Forms for Windows 11 is now available for download from the Microsoft Store.

If you suffer from the "messy desktop" syndrome, the latest Fences 5 release will help you fix the problem. The popular desktop management app received a big update with new features, such as desktop focus, easier group access, and more. Fences 5 is now available for $9.99.

There were no Surface firmware updates this week, but Microsoft published two video guides detailing how to disassemble the Surface Laptop Studio 2 and the Surface Go 4. Use those videos to learn how to repair the latest Surface devices if you are brave enough to fix your gadgets yourself.

Other notable updates include the following:

• Microsoft Edge 121.0.2220.3 in the Dev Channel with video translation and new image editing capabilities.
• Skype 8.109 Preview with reworked message truncation, camera improvements, and stability fixes.
• New Windows 11 virtual machines with the Moment 4 features. You can use them for free during a 90-day evaluation period.

New drivers released this week:

• Intel Arc WHQL 31.0.101.4953 with fixes for Starfield, Alan Wake 2, Halo: The Master Chief Collection, and World War Z.
• NVIDIA 546.17 WHQL with DLSS 3 support for Starfield and Call of Duty Modern Warfare III.

On the gaming side

Learn about upcoming game releases, Xbox rumors, new hardware, software updates, freebies, deals, discounts and more.

The gaming section of this week's Microsoft Weekly kicks off on a sweet (literally) note. The official Xbox account on X is hosting a new sweepstakes event, giving gamers in the US a chance to win a custom Wonka Movie Xbox Series X and an edible (again, literally) Xbox controller made of chocolate.

If a chocolate-looking Xbox Series X is not your thing, Microsoft has another giveaway to participate. This contest lets you win a custom Bluey the Videogame Xbox Series X with a cute custom-themed controller.

343 Industries launched a new part of Season 5 for Halo: Infinite. "Combined Arms" offers free content, 20 tiers of free customization rewards, new armor and vehicle coatings, emblems, and visors. The update also contains an all-new multiplayer map inspired by Halo 3.

Sea of Thieves is another Microsoft game getting a big update. The second part of season ten's update delivers The Skull of Siren Song event, pitting multiple pirate crews against each other in a race to claim a magical artifact.

In addition, despite the disastrous launch, Arkane Studios continues updating Redfall with new content. The third update is now available with a brand-new weapon, AI improvements, mission fixes, performance enhancements, and better accessibility.

This week, The Game Awards announced the nominations for the 2023 awards. As many expected, Alan Wake 2 and Baldur's Gate 3 received the most nominations (both nominated for Game of the Year). Marvel's Spider-Man 2 and Super Mario Brows. Wonder also received seven and six nominations. The Game Awards will reveal winners on December 7.

Xbox and PC Game Pass subscribers will soon receive several new games. Coral Island and Persona 5 Tactica are now available, with Dune: Spice Wars and Rollerdrome joining on November 28, 2023. It is also worth noting that seven games will leave Xbox and PC Game Pass on November 30. Those titles include three Battlefield games, Anvil, Eastward, and more.

By the way, many Xbox Game Pass titles are available on NVIDIA's GeForce NOW streaming service. And to attract more customers, NVIDIA is now giving away three months of PC Game Pass when you sign up for six months of GeForce NOW Ultimate ($99), allowing you to save $30.

Deals and Freebies

The Epic Game Store is giving away Surviving the Aftermath and Earthlock. The first game is set in an apocalypse setting where you manage a colony and try to keep everyone safe. Earthlock is a fantasy adventure turn-based RPG.

Valve also has a freebie you can snag before November 20, 2023. The original Half-Life is now available for free on Steam. Grab it while you can if you do not own this legendary piece of gaming history.

If you want more, check out our latest Weekend PC Game Deals article covering a multitude of discounts and special offers.

A blast from Microsoft's past

John Callaham's weekly "Look back" series provides throwbacks into the past, detailing the company's products, partnerships, mishaps, and successes from years ago.

For many people, MS-DOS and Windows are synonyms for Microsoft. But did you know that before MS-DOS and Windows 1.0, which marked its 40th birthday last month, there was another "Microsoft-made" operating system for desktop computers? This week, John Callaham's look-back article details the history of Xenix, a Unix-based OS Microsoft had hoped to become the standard choice on the personal computer market.

You probably know Microsoft Flight Simulator, but did you know there once was Microsoft Space Simulator? The second look-back article of this week is about Microsoft's forgotten space simulator (as the name implies), where you could fly the Space Shuttle, pilot the Apollo Lunar Lander, perform EVAs (extravehicular activities), visit space stations, and more.

The game was initially released for MS-DOS, one year before Microsoft launched Windows 95. Despite its age and less-than-impressive graphics, Microsoft Space Simulator still has dedicated fans, and many ask Microsoft to release a modern version of the simulator.

Random fact about Microsoft

And here is a randomly selected piece of trivia about the company, Windows, and other Microsoft-made things.

Microsoft is famous for its rich set of productivity apps that help users get things done. Many people know the company for Office, Teams, Skype, and other well-established products. But did you know that Microsoft used to offer its customers an app to manage finances? In October 1991, the software giant released Microsoft Money, a personal finance management software. Available on Windows and Windows Mobile between 1991 and 2011, the app offered various tools to help you track expenses, create budgets, and view bank accounts.

Source

Just over a day since the surprise firing of OpenAI CEO Sam Altman that sent shock waves through the tech industry, the OpenAI board is reportedly engaging in discussions with Altman to potentially return as chief executive of the company, according to The Verge, citing people familiar with the matter. The outlet says that Altman is "ambivalent" about returning and would want significant changes to how the company is run.

The New York Times reports that the talks are part of a pressure campaign from OpenAI investors, led by Microsoft, who has invested $13 billion in the for-profit arm of OpenAI.

The move would be a dramatic about-face for the board, which has received intense scrutiny from all corners of the tech world for abruptly and surprisingly firing one of the tech industry's most high-profile CEOs. Altman was popular with both Microsoft leadership and OpenAI staff, and his firing came as a shock to employees, who reportedly pushed back against OpenAI Chief Scientist Ilya Sutskever's handling of the move during an all-hands meeting on Friday.

The overtures toward Altman suggest that the board may have been surprised by the sizable reaction from the world at large—and is keenly feeling the aforementioned pressure from investors like Microsoft who have bet big on OpenAI's technology.

In an internal memo obtained by Axios on Saturday, OpenAI COO Brad Lightcap hinted at criticism of how the firing was handled and confirmed that Altman was not fired in response to "malfeasance or anything related to our financial, business, safety, or security/privacy practices." With no apparent legal wrongdoing at play, and with broad support within the company (present board of directors excluded), the path could clear for Altman's return, should he choose to accept it.

In the OpenAI blog post that first announced Altman's firing on Friday, the board wrote that Altman was fired because he "was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities." COO Lightcap wrote in his memo on Saturday that the firing was due to a "breakdown in communication between Sam and the board." The firing prompted OpenAI President Greg Brockman to quit in solidarity with Altman on Friday afternoon.

As we've previously reported, several sources citing OpenAI insiders suggest that a culture clash with OpenAI Chief Scientist Ilya Sutskever over safety issues and the commercial direction of OpenAI was the primary reason for Altman's firing. Sutskever, a member of the OpenAI board, reportedly orchestrated the ouster, which came as a surprise to both Altman and Brockman. Altman was a member of the board, and Brockman served as chairman. Now four board members remain.

If Altman were to return to OpenAI, we do not yet know what that would mean for Sutskever's position at the company, or if others like Brockman and the three senior OpenAI researchers who also resigned would return with Altman as well. According to the New York Times, Altman and Brockman have already taken initial planning steps toward founding a new AI company and have received pledges of support from investors, should that take place.

"The best case for the board is that Sam and Greg come back, the 4 board members resign, and lay low for a long while," speculated venture capitalist Will Hubbard on X. "The worst case for the board is that Sam and Greg start another company, take all OpenAI's talent and future funding, and have a lawsuit brought against them." No plans for a lawsuit have been announced.

But even if the talks with Altman go nowhere, the fact they are taking place serves as yet another unexpected turn in this very unusual series of events. Expect further updates as details emerge.

Source

But judging by how the situation’s unfolded, it seems that OpenAI’s investors and partners — and many of its employees — were more comfortable with the idea of the board’s power than it exercising that power. And they didn’t count on the cult of personality surrounding Altman, the former president of Y Combinator and a longtime fixture of the Silicon Valley startup scene.

On Saturday evening, just over 24 hours after the OpenAI board unceremoniously announced that Altman would be replaced by Mira Murati, OpenAI’s CTO, on a temporary basis, multiple publications published reports suggesting that the OpenAI board was in talks to have Altman return at the helm.

What changed their mind? The ire and panic, of investors, no doubt — and rankled ranks.

Satya Nadella, the CEO of Microsoft, a major OpenAI partner, was reportedly “furious” to learn of Altman’s departure “minutes” after it happened, and has been in touch with Altman — and pledged to support him — as OpenAI backers recruit Microsoft’s aid in exerting pressure on the board to reverse course. Meanwhile, some key venture capital backers of OpenAI are said to be contemplating a lawsuit against the board; none, including Khosla Ventures and LinkedIn co-founder Reid Hoffman, a former OpenAI board member, were given advance notice of the decision to fire Altman.

Khosla Ventures founder Vinod Khosla said the fund wants Altman back at OpenAI but will back him in “whatever he does next.”

@sama is a once in a generation CEO. He’s an instigator whose positive mark on the world will be indelible, and profound, in every corner of the globe. It’s an honor to work alongside him wherever he is.

— Vinod Khosla (@vkhosla) November 19, 2023

Microsoft in particular has a lot of leverage. OpenAI has received only a fraction of the company’s recent $10 billion investment, according to Semafor, and a significant portion of the funding is in the form of cloud compute purchases instead of cash. Withholding those credits — and the rest of the cash investment — could leave OpenAI, which is hungry for capital as the costs of running and training its AI systems mount, in a financially untenable position.

As the board considers its next move, OpenAI top AI researchers and executives are calling it quits.

On Friday, Greg Brockman, OpenAI’s president and a co-founder, resigned after the board stripped him of his position as chair. Three senior OpenAI researchers left after Brockman, including the director of research Jakub Pachocki and head of preparedness Aleksander Madry. And more employees are reportedly tendering their resignations.

They perceive it as a power struggle with unacceptable levels of collateral damage between two board members in particular, Quora CEO Adam D’Angelo and Sutskever, and Altman. Sutskever said during a company all-hands meeting on Friday that he felt removing Altman was “necessary” to protect OpenAI’s mission of “making AI beneficial to humanity,” suggesting Altman’s commercial ambitions for the company were beginning to unsettle the board’s kingmakers. (OpenAI’s board is technically a part of a nonprofit that governs OpenAI’s monetization strategy.)

But many in the tech community — and apparently OpenAI — felt the opposite. The outpouring of high-profile support for Altman was immediate.

And so, as Altman and Brockman approach investors about a new AI-chip-focused venture and OpenAI’s employee stock sale faces an uncertain future, the board of directors has an uncomfortable about-face ahead of it. Sutskever and the rest of the board — tech entrepreneur Tasha McCauley; and Helen Toner, the director of strategy at Georgetown University’s Center for Security and Emerging Technology — might’ve felt their decision on Altman’s firing was right and justified. But it seems it wasn’t truly their decision to make.

Source

Sam Altman, the just ousted CEO of OpenAI, is discussing a possible return to the company behind the ChatGPT bot even as he considers launching a new artificial intelligence (AI) venture, a person briefed on the matter said on Saturday.

A day after the board fired him in a surprise move that rocked the tech world, Altman was talking with OpenAI executives about improving the company's governance structure while he discusses with some core OpenAI researchers and others loyal to Altman how they could start a new AI company, the person said.

The possibilities of a return or a restart for Altman, seen by many as the face of generative AI, are in flux, said the source, who asked not to be named because the source was not authorized to speak on behalf of the parties involved.

OpenAI and Altman did not reply to requests for comment.

Investors in OpenAI, including its biggest backer Microsoft, are discussing damage control, including possibly pushing the board to restore Altman as CEO, fearing a mass exodus of talent without him, other sources said.

Khosla Ventures, an early backer of OpenAI, wants Altman back at OpenAI but "will back him in whatever he does next," the fund's founder Vinod Khosla posted on X on Saturday.

Microsoft declined to comment. It reportedly owns 49% of the company, while other investors and employees control 49%, with 2% owned by OpenAI's nonprofit parent.

Emotions ran high on Saturday as current and former employees were angered by Altman's sacking and worried over how an upcoming $86 billion share sale could be affected by the sudden management upheaval.

OpenAI, a nonprofit co-founded by billionaire Elon Musk, launched ChatGPT on Nov. 30 last year, setting off a global sensation over generative AI technology that quickly became the world's fastest-growing software application. It set off a wave of investments and announcements across industries to use AI to enhance everything from financial services and healthcare to entertainment and media.

Trained on reams of data, generative AI can create human-like content, helping users spin up term papers, complete science homework and even write entire novels. After ChatGPT's launch, regulators scrambled to catch up: the European Union revised its AI Act and the U.S. kicked off AI regulation efforts.

By Saturday, some shell-shocked employees contemplated quitting if Altman was not restored by the end of the weekend, one source said. Others expressed support for joining Altman in starting a company, a third person familiar with the matter said.

Former OpenAI President Greg Brockman, who said he quit OpenAI over Altman's firing on Friday, is expected to join any effort, according to the Information, which earlier reported the possible new venture, citing a person familiar with the matter.

Brockman did not immediately respond to a request for comment. OpenAI did not respond to a request for comment.

Some researchers at OpenAI, including Szymon Sidor, have quit the company over the CEO change, but it was unclear if Sidor and others would join a new Altman venture, two people familiar with the matter said. Sidor confirmed quitting.

Altman and Apple's (AAPL.O) former design chief Jony Ive have been discussing building a new AI hardware device, the Information reported in September. It reported that SoftBank (9434.T) CEO Masayoshi Son had been involved in the conversation.

Altman's ouster was over a "breakdown of communications," not "malfeasance," Chief Operating Officer Brad Lightcap wrote in an internal company memo on Saturday that was viewed by Reuters.

Tech website The Verge earlier reported the OpenAI board's discussions with Altman to return as CEO. Forbes reported on Saturday investors were plotting to restore Altman as CEO.

Source

• Microsoft started FY24 on a strong note, with significant growth and margin expansion in every segment.

• With immense opportunities across every part of its business, Microsoft continues to gain share over its rivals, and the path for $400 has never been clearer.

• Worrisome news regarding Sam Altman's departure from OpenAI could put pressure on the stock in the near term, but should not overshadow the unparalleled long-term opportunity.

• I expect Microsoft will continue to provide market-beating returns for the foreseeable future and reiterate a Buy rating.

Microsoft (NASDAQ:MSFT) is the market leader on so many fronts and has so many tailwinds it's difficult to keep count. The path to surpass Apple (AAPL) as the most valuable company in the world has never been clearer, and that's not a knock on Apple.

That being said, a couple of days before the writing of this article, an earthquake occurred. Well, not an actual earthquake, but something of that magnitude. On a Friday afternoon, OpenAI, one of the most important companies in the world and a crucial partner of Microsoft, announced it is letting go of its founder and CEO Sam Altman. No real reason was provided.

We'll make an attempt to understand the meaning of his departure for Microsoft and tell the story of Microsoft's unparalleled amount of tailwinds.

The Implications Of Sam Altman's Departure

I think it would best to begin with one of the hottest topics on Wall Street, as it will presumably overshadow anything else with regards to Microsoft in the near term.

Starting with the actual news. On Friday noon, November 17th, OpenAI announced a leadership transition, which included the following statement:

The board of directors of OpenAI, Inc., the 501(c)(3) that acts as the overall governing body for all OpenAI activities, today announced that Sam Altman will depart as CEO and leave the board of directors. Mira Murati, the company’s chief technology officer, will serve as interim CEO, effective immediately.

...

Mr. Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI.

...

As a part of this transition, Greg Brockman will be stepping down as chairman of the board and will remain in his role at the company, reporting to the CEO.

I've seen many attempts across social media and news outlets to shed additional light on the matter, but none of them are providing a sufficient explanation. Tweets made by Sam Altman and Greg Brockman themselves only contributed to the confusion.

So, we'll have to use what we do know and try to understand the meaning of this shocking announcement. For that, we need to first understand OpenAI's corporate structure.

OpenAI, 'Our Structure'

Condensing the entire company history into a paragraph, OpenAI started as a pure non-profit organization. It soon learned that a non-profit organization struggles with getting sufficient capital for the company's needs, so they have announced a capped profit company, under which investors will be able to benefit financially from its business.

OpenAI ended up being controlled by an independent board of directors whose members have essentially no financial interest in the company. Microsoft, which owns a 49% stake in the capped profit entity has no seat on the board and no control.

This brings us back to yesterday's news. Investors need to understand that (1) Microsoft had no say in the firing of Sam Altman; (2) It had no say in the decision to demote Greg Brockman; (3) Its partnership with OpenAI is based on contracts and partnerships, rather than an ownership or controlling stake.

On the basis of these three points, which are based on facts and not assumptions, we can analyze the leadership transition under three alternatives.

Alternative 1: The Board Of Directors Didn't Approve The Company's Direction

This is the most likely alternative, and as the days go by and additional reporting is provided, it's becoming increasingly likely.

It seems that the independent board of OpenAI found the company's latest developments contradicting with their stated mission of:

Building safe and beneficial artificial general intelligence for the benefit of humanity.. culminating in AGI - meaning a highly autonomous system that outperforms humans at most economically valuable work.

From the wording of the announcement, it's hard to infer what exactly was Sam Altman not consistently candid about. However, it could be understood, that the former CEO, who recently said OpenAI will take additional funding from Microsoft, might have, from the board's point of view, failed to do his job.

The problem with this alternative is that the company has just held a huge developer conference, which Sam Altman keynoted, in which he provided a detailed long-term plan. It's hard to imagine why all of a sudden, a few days after the conference, the board decided to supposedly block Sam's and Greg's ambitions, which were pretty clear and planned for a long time.

However, with reports coming just two days later about the board talking with Sam Altman about a return, it seems the board just might have been that impulsive.

Following news that employees are extremely frustrated with the board's decision, which has put a halt on a long-awaited sale process valuing the company at $86 billion, and a large number of staffers threatening to leave the company in light of this decision, it's becoming more and more probable that the independent board made an ill-advised decision that could significantly harm the company's future.

Alternative 2: It Was Based On Personal Matters

Under personal, I include anything that's not business-related, and I'll leave to you the task of tracing after the different rumors that are out there. According to the board's announcement, Sam was not "consistently candid", which could suggest something of these characteristics.

The problem with this alternative is that it is less likely that both Sam Altman and Greg Brockman have done "personal" things that justify this change affecting both of them. In addition, the company's chief operating officer came out with a letter to employees stating the following:

We can say definitively that the board’s decision was not made in response to malfeasance or anything related to our financial, business, safety, or security/privacy practices. This was a breakdown in communication between Sam and the board.

His statement, in combination with investors' and employees' push to reinstate the company's founders in their roles, suggests that to their best knowledge, there was no "personal" reason for the transition.

Alternative 3: It Was Done In Understanding With Microsoft

To me, this is the least likely alternative.

I just don't see a scenario where Satya Nadella appears in a conference keynoted by Sam Altman and then decides to let go of him a few days later. Still, some market participants think that Microsoft took part in this transition.

Evidently, Satya Nadella was quick to tweet about Microsoft's long-term agreement with OpenAI, and its commitment to Mira (the interim CEO) and the team. However, according to a Bloomberg report, Microsoft is pushing for Sam Altman's reinstatement, so if the reporting is true, that really shuts down the curtain on this alternative.

Possible Implications Of Sam Altman's Departure

I don't think anyone, including myself, really knows the reason for the announcement. However, it is becoming increasingly clear that investors have already learned the risk of Microsoft relying on a technology owned by a third party, which Microsoft doesn't control. Especially when the third-party is controlled by a non-profit entity, whose board is comprised by people with no financial incentive in the company's success.

And in this case, Microsoft is critically dependent on its relationship with OpenAI, a relationship that contributed hundreds of billions of dollars to Microsoft's market cap, based on investors' expectations regarding Microsoft OpenAI-based products.

So where are we going from here? I think that until further clarity is provided, it would be reasonable to expect to see pressure on Microsoft's stock.

Even if Sam Altman is reinstated, investors will place a higher risk premium over this partnership, and I'm sure will want to know what Microsoft is doing to mitigate such risk. On Microsoft's side, I'm positive that it's going to accelerate its investments in internally-developed alternatives.

To conclude, this is bad news for Microsoft, and it doesn't really matter what happens next. Since the launch of ChatGPT it was pretty much smooth-sailing optimism, and this is the first hiccup for the business in 2023 really.

However, will it affect its long-term prospects and potential? I'd say no. While this is a significant headwind in the near-term, I don't think it will harm affect the launch of related products and services.

Microsoft has so many tailwinds on so many diversified fronts, I'm certain it will be able to overcome this issue, and expect no material effect on its results.

Now, let's focus on the fun stuff.

Is There Another Company With This Many Opportunities?

Microsoft started FY24 on a strong note, announcing results that handily beat expectations, and provided guidance well above consensus estimates.

Before we dive deeper into the company's results and each of its separate opportunities more thoroughly, I think it's valuable to go over the overall opportunity sets that are ahead

Microsoft aggregates its results under three operating segments, Productivity and Business Processes; More Personal Computing; and Intelligent Cloud.

In Productivity and Business Processes, Microsoft is already growing at a double-digit pace and should continue to grow at that pace even without the launch of the copilot products. The amount of knowledge workers around the world continues to grow at a steady pace, and many legacy enterprises are yet to fully transition to cloud-based services. Well, that isn't enough for Microsoft.

They are launching the Copilot suite at $30 per user. Considering the office suite has more than 345 million seats, you can only imagine the size of the opportunity.

In More Personal Computing, aside from the recovery play in hardware, Microsoft is continuing to gain share with Bing and is riding ChatGPT to grow its search revenues. And the segment's biggest opportunity lies in gaming, following the completion of the Activision Blizzard acquisition.

Lastly, in Intelligent Cloud, Azure continues to gain share over Amazon's AWS (AMZN) and Alphabet's Google Cloud (GOOG). And now, a business that's already growing at a high-twenties pace, is going to get another push from continuing AI developments. Unlike what Google wants you to think, it seems Microsoft's investment in OpenAI created an unbreakable monster, which increases the gap over its competitors every day.

In addition, Microsoft recently revealed two internally developed chips focused on artificial intelligence and cloud computing, which should decrease its reliance on the likes of Nvidia (NVDA), help reduce a shortage of supply risk, and enhance the company's value proposition.

To sum up, Microsoft has so many good things going for it right now, even the bearest of bears would have a difficult time arguing against its immense growth opportunities.

Fiscal Q1-24 Highlights

Revenues in the first quarter grew 12.8% to $56.5 billion, a $1.95B beat, and EPS came in at 2.99$, a $0.34 beat. The company also provided guidance well ahead of consensus estimates, expecting revenues of $60.9B for the second quarter, and more than $20.4B in net income.

< View the graphic at the source page. >

Created by the author using data from Microsoft's financial reports.

Looking at a segment breakdown, we can see growth was broad-based, with every segment, including the struggling More Personal Computing, seeing positive higher revenues from the prior year period. Productivity & Business grew by 11.7%, Intelligent Cloud grew by 19.4%, and More Personal Computing sales increased by 2.5%.

Created by the author using data from Microsoft's financial reports.

Even more impressive than the top-line growth, we saw significant margin expansion all across the board.

Productivity & Business operating margin improved by 360 bps Y/Y, resulting in operating income growth of 19.8% to $9.97B. Intelligent Cloud margins improved by 430 bps Y/Y, as operating income grew 30.9% to $11.75B. Lastly, More Personal Computing margins increased by 620 bps, driving operating income of $5.17B, a 22.7% increase Y/Y.

Microsoft Q1-24 Outlook Slides

Management provided a better-than-expected outlook, which includes the impact of the Activision acquisition. For the second quarter, management expects double-digit growth across every segment, with revenue targets that reflect growth to remain at least at Q1 levels. Specifically in More Personal Computing growth will accelerate to 17%, due to the inclusion of Activision.

Looking at margins, the guidance reflects a 120 bps decline in gross margin and a 190 bps decrease in operating margin, partially due to the lower margin Activision business.

The Cloud Opportunity & The New Chips

When it comes to Microsoft, talking about the cloud generally means talking about Azure. Within Azure, there are several intertwining pillars that are driving growth. Until not long ago, Azure was all about compute, and migration of workloads. Around these workloads, Microsoft provides cyber security, coding KPIs, and a whole suite of ancillary offerings.

Today, Azure is not only a compute story, but it is also, and some would say primarily, an AI story. Through its partnership (and 49% ownership) with OpenAI, Microsoft is clearly the leader in AI. I am not enough of an expert to start discussing technology leadership, but I am able to put the obvious pieces together.

One, Microsoft and OpenAI were the ones that started the AI mania. It was only after the ChatGPT launch that companies like Google were even talking about launching Bard and making AI their main theme.

Two, while Microsoft is all in on OpenAI, we're still seeing Alphabet and Amazon looking for their horse in this race. So much so that they are investing in the same company, Anthropic, and therefore don't get the same benefits that Microsoft gets with OpenAI. On the flip side, the Sam Altman's news might signal that being too dependent on OpenAI is actually a risk.

Three, with Microsoft's extensive presence in the enterprise infrastructure, it is able to offer unique and integrated solutions for security, as well as leverage cross-selling, while Google is lagging on that front.

Four, OpenAI already has more than two million developers, building solutions through its APIs, and using its LLMs. Meanwhile, it's just been announced that Google is delaying its competitive Gemini launch, and Amazon is still developing its own AI model under the name Olympus.

The first-movers advantage on all those fronts is key. When developers build on your platform and users are getting accustomed to your applications, it's hard for competitors to make them transition to a different platform, even if is superior. The combination of switching costs and day-to-day habits already put Google and Amazon at a disadvantage.

Created and calculated by the author using data from the companies' financial reports; Microsoft's fiscal quarter is two periods ahead of the calendar year, meaning Q3-23 is Microsoft's fiscal Q1-24.

Taking all the above into account, it shouldn't come as a surprise that Microsoft separated itself from the pack in the third quarter. Despite its much larger size, Azure outgrew Google Cloud by six percentage points. Furthermore, Microsoft's intelligent cloud segment (which includes other businesses, not just Azure), operates at operating margins higher than 48.4%, whereas Google Cloud is barely profitable, and AWS is in the 30% range.

One thing people held against Microsoft was the fact that it doesn't have an in-house chip offering. Well, that claim is no longer relevant. A few days ago, at its Ignite conference, Microsoft unveiled new chips, one that is optimized for AI work and one optimized for computing. This will reduce Microsoft's dependency on the likes of Nvidia, and possibly reduce its costs. Furthermore, if successful, it could help the company negate any supply constraints that are already beginning.

The Gaming Opportunity

This one is pretty obvious. Microsoft had just completed the acquisition of one of the most successful game-makers in the world, and for a valuation that seems very reasonable on paper, at around 31x P/E.

From using its own cloud infrastructure, saving on interest expense, and cutting off duplicate corporate roles, Microsoft can very easily improve the margins of an integrated Activision Blizzard.

Furthermore, by leveraging its distribution through Game Pass and Xbox, it's reasonable to expect a decent top-line contribution as well.

The gaming industry is one of the largest digital markets in the world, and Microsoft has just become one of the largest gaming companies in the world.

The Copilot Opportunity

Microsoft has at least 345 million unique seats using its office, something probably closer to 400 million today. The Copilot suite is priced at $30 a seat. Even if only 10% of seats take the Copilot add-on, there's a $1 billion opportunity in the very near term.

Just like any office product, over the long term, it becomes a standard tool in the enterprise, as knowledge workers switch jobs and bring their tools with them.

In addition, the Copilot suite should fuel the adoption of the regular office suite, and the Windows system, and could support hardware sales.

Valuation

Microsoft is trading at a trailing twelve-months P/E of 35.8x, and a forward P/E of 33.0x, both are higher than its historical average.

Data by YCharts

As we can see, the shares trade in the range of 25-40. With so many opportunities ahead, and overall market optimism about technology, AI, and big-tech FOMO, it's easy to understand why Microsoft is trading near the high end of its historical range.

That being said, based on current consensus estimates, which Microsoft usually beats handily, it is trading at a 28.5x multiple over its fiscal 2025 earnings. That isn't too high of a multiple.

Created and calculated by the author based on data from Microsoft's financial reports and the author's projections

Looking at my financial model for the company, I estimate Microsoft's fair value at $400 a share.

In my model, I assume Microsoft will grow revenues at a CAGR of 9.7% between FY24-FY31, based on its immense growth opportunities which we discussed above. I expect free cash flow margins to increase gradually to 35.7% in 2031, as hardware becomes a lower portion of the business, the company continues to showcase unparalleled operating leverage, and CAPEX spending as a percentage of sales decreases over the long term.

Taking a WACC of 7.9%, and adding Microsoft's net cash position, I arrive at the mentioned price target.

Conclusion

The Sam Altman news, albeit worrisome, is in my view not enough to harm Microsoft's vast opportunities, which span across every part of its diversified business.

I expect the stock to be pressurized in the near term until further clarity is provided, but with a successful rollout of OpenAI-based products, I believe the market will gradually grow its optimism back.

Microsoft's road to becoming a $3 billion company has never been clearer, and it should be able to provide investors with at least double-digit returns for the foreseeable future.

Despite the recent news and its outperformance year-to-date, I reiterate Microsoft as a Buy.

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• The company's investors were pushing the board members to reverse their decision, per reports.

OpenAI appears "optimistic" that it can reel its ousted CEO Sam Altman back to the company just a day after he was suddenly pushed out of his role on Friday, The Information reported.

Chief Strategy Officer Jason Kwon wrote in a memo sent to staff late Saturday night that the company remained "optimistic" that it could bring back Altman and several senior employees who left in light of the CEO's abrupt exit, sources familiar with the situation told the tech news outlet.

Among those senior figures included Greg Brockman, OpenAI's co-founder and president, who announced on X that he was quitting hours after Altman departed. Three senior researchers — Jakub Pachocki, Aleksander Madry, Szymon Sidor — also had resigned, The Information reported earlier.

"We are still working towards a resolution and we remain optimistic," Kwon wrote, according to The Information. "By resolution, we mean bringing back Sam, Greg, Jakub, Syzmon, Aleksander and other colleagues (sorry if I missed you!) and remaining the place where people who want to work on AGI research, safety, products and policy can do their best work."

Kwon said that another update will be shared on Sunday morning, according to the report.

An OpenAI spokesperson did not immediately return a request for comment sent on the weekend.

Altman's abrupt ouster shocked those at the company and investors, including Microsoft.

Less than a day after Altman, who co-founded the AI startup in 2015, was ousted, investors pushed to convince OpenAI's board to reverse the decision, according to The Wall Street Journal.

Some OpenAI employees also appeared to express solidarity behind Altman by responding to a note he posted on X on Saturday evening that said, "i love the openai team so much."

i love the openai team so much

— Sam Altman (@sama) November 19, 2023

Several employees re-posted the note with a heart emoji.

Altman's return to OpenAI could potentially mean an impending shake-up of the company's current board members and governance.

A condition that Altman set for him to re-assume his CEO role is if the existing board resigned, the Journal reported.

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On Friday, Sam Altman - one of the brightest stars of the booming artificial intelligence industry, a man who for many had become the go-to spokesperson for AI - was unceremoniously dumped from the company he co-founded, a firm that introduced many people directly to the concept for the first time.

Yes, AI has been in our lives for ages - curating our social media feeds, recommending movies on video streaming platforms, playing a hand in calculating our insurance premiums.

But until the arrival of the AI chatbot ChatGPT, most people had never actually spoken to it before - or had it talk back.

Artificial intelligence is an incredibly powerful technology. It sounds like a bad movie plot but plenty of experts seriously say it could either save the world or destroy it.

They are high stakes - and Mr Altman is one of relatively few people with that future in his hands.

His dismissal from OpenAI, the company behind the ChatGPT bot, was as sudden as it was dramatic. It's fair to say my phone blew up when the news broke, as the tech community and journalists scrambled to make sense of it all.

In a statement, his board of directors said they believed he had not been "consistently candid in communications" with them, and as a result they had "lost confidence" in his leadership.

Reading between the lines, this suggests there was something he either had or had not told them - and somehow he's been caught out. The wording is so powerful, it almost sounds personal.

There are swirling rumours but, so far, no further facts.

It's not unknown in tech firms for a toxic working culture to lead to the boss's downfall - but there has been no grumblings about that in the case of OpenAI.

In October it was set to be valued at $80bn (£64bn) - so there's no apparent cash problem.

Is there a problem with the tech itself? A few days ago Mr Altman wrote about ChatGPT struggling to meet a "surge in demand" and having to pause sign-ups for its top-level subscription service. Is that enough to face the sack over though?

Just a few weeks ago, Sam Altman attended an AI summit alongside world leaders and other tech industry leaders - but now he's been ousted by OpenAI

His co-founder Greg Brockman, who was dismissed from the board a few minutes after Mr Altman, said both men were shocked by how suddenly it had happened.

There were only six people on that board, including Mr Brockman and Mr Altman. If they were indeed blindsided, that means this decision was taken by just four. What happened to make this small group act so decisively and so quickly?

Mr Altman, now the former CEO of OpenAI, had addressed world leaders in discussions about the risks and benefits posed by the powerful tech he was pioneering.

He memorably said that AI was "a tool and not a creature" and seemed honest about his fears that it could one day become out of control.

Just two weeks ago he was in the UK at the world's first AI safety summit as one of only around 100 global delegates. He gave a speech last week about the future of his company and its tech.

I think it's safe to assume he genuinely had no idea what was coming.

Silicon Valley's big guns have so far rallied behind Mr Altman, including former Google CEO Eric Schmidt, who described him as a "hero of mine".

Microsoft boss Satya Nadella said he had "confidence" in the firm. Well, he needs to - Microsoft has invested billions in it, and the tech which underpins ChatGPT is now embedded in Microsoft's office apps.

One character who has been uncharacteristically quiet so far is Elon Musk. He and Mr Altman set up OpenAI together, along with others, but are said to have fallen out over a decision to move it away from being non-profit. There are rumours that it is this very issue which has once again divided opinion within the firm now.

Mr Musk's company X, formerly Twitter, has released a new chatbot called Grok. Perhaps he's not unhappy about OpenAI being a bit distracted by a drama of its own making for a while.

In the meantime it falls to chief technology officer Mira Murati to take over as interim CEO. The tech world is a small one - she previously worked at Musk's car firm Tesla.

Can she now steady this suddenly lurching ship?

Source

It uses a slightly different technique than the recently reviewed Fadblock extension. Fadblock skips or fast-forwards advertisement on YouTube. The developer has turned the extension into a commercial extension in the meantime and ratings have tanked as a consequence.

Google is cracking down on the use of ad-blockers on YouTube. The site may display prompts to users when it detects content blockers which ask users to either turn off the ad-blocker or buy YouTube Premium.

While most conventional content blockers, such as uBlock Origin, have always recovered from new anti-ad-blocking techniques on YouTube, it is always a good idea to know about other potential techniques to deal with advertisement on the popular video publishing site.

Ad Accelerator

Ad Accelerator installs fine in any Chromium-based browser and works automatically from that moment on. The extension mutes advertisement as soon as it detects it on YouTube. It accelerates the ad's playback furthermore, but does not skip ads at this point. You will see the advertisement, but only for a fraction of the time it takes to play normally.

This is the main difference to Fadblock, which supports skipping ads. The main difference is that skipping is faster than fast forwarding ads.

Ad Accelerator is an open source browser extension. You can check out the source code on GitHub.

The developer posted a list of ideas that could some day be implemented. Apart from support for other video hosting services, including Hulu, Netflix and Dailymotion, there is also one entry for manually clicking to fast forward on YouTube.

The technique to skip ads entirely is not present on the list, but that does not necessarily mean that it is not in development.

Closing Words

Google's attempt to fight content blockers on YouTube could turn into an arms race. The fast-forwarding technique is quickly rising to popularity as it works really well.

Technically, these extensions do not block advertisement on YouTube. They fast forward and mute them only, which is not the same thing.

They are allowed in the Chrome Web Store for now, but only time will tell if that is going to last.

Now You: do you watch videos on YouTube?

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