Microsoft’s OpenAI Woes: Can Sam Altman Help Turn Things Around?

Microsoft Corp. has made a surprising move by appointing Sam Altman, the former CEO of OpenAI, to head a fresh artificial intelligence research team. This decision comes after a tumultuous period of power struggles within OpenAI, where boardroom coups and counter-coups took place. Microsoft’s decision is particularly noteworthy as they had previously shown significant investment in OpenAI and its former CEO, Altman.

But it’s not an ideal outcome for Altman or Microsoft. That’s why a number of OpenAI investors are still calling for Altman to return as director, something Microsoft CEO Satya Nadella said he’s open to.

Nearly all of OpenAI’s approximately 770 employees have signed a letter to OpenAI’s board of directors threatening to resign unless its executives resign over Altman’s dismissal. “Microsoft has assured us that this new subsidiary will have positions for all OpenAI employees if we decide to join,” the letter reads.

If it goes through, it would effectively be an acquisition without a term, which at first would seem like a coup for Nadella.

Although Microsoft shares hit all-time highs following the news, there are issues surrounding Altman’s hiring. First, hiring new employees is going to be insanely expensive, especially in a year when Microsoft froze wages for full-time employees.

In addition to this, Microsoft still has a commitment of more than $13 billion to OpenAI. It’s not in Microsoft’s interest to blow up the startup.

Any employee who joined Microsoft simply cannot replicate the work done on OpenAI features like GPT-5 without causing nightmares about trade secret theft. That’s partly why Altman’s return to OpenAI has been so powerful, rather than trying to conjure something equally remarkable out of thin air.

Nadella has suggested that Microsoft make the best of a bad situation. He publicly emphasized that Altman would have autonomy at Microsoft. He cited LinkedIn, GitHub and the maker of Minecraft as examples of Microsoft units that operate effectively independently.

The message is likely intended to attract OpenAI engineers and computer scientists who are wary of joining a large company with about 200,000 employees and scattered business areas. These are people who think deeply about how AI could affect humanity, not how it could improve Bing. And there are many other companies they could join that share OpenAI’s noble mission. “I have never received so many job offers so quickly in my life,” OpenAI researcher Jerry Tworek posted on social media X.

Greg Brockman, the co-founder of OpenAI who was sidelined in the chaos, said he would join Altman at Microsoft, along with at least three other top researchers. “We’re going to build something new and it’s going to be incredible,” Brockman wrote.

Even if Altman’s AI team were granted independence, it would inevitably face opposition from existing AI and research groups within Microsoft trying to solve similar problems. Bloomberg reported in June that some inside Microsoft were unhappy that Nadella and CTO Kevin Scott were outsourcing so much AI work to an untested startup instead of betting on domestic projects. It’s possible that tensions could escalate within Microsoft as different teams compete for resources.

Another headache is Altman’s countless side hustles, including the controversial crypto company Worldcoin, which aims to scan the eyeballs of every person on Earth, or his recent effort to raise money for an artificial intelligence chip company that will take on Nvidia Corp. Microsoft unveiled its own custom chips. Microsoft shareholders certainly don’t want an all-star hire competing on that front.

In an interview with Bloomberg TV on Monday, Nadella told Bloomberg TV that they were “working through the governance aspects” of Altman’s outside ventures, but said Altman would only have accepted a job at Microsoft if he “wanted to spend all his time” there.

In several posts, Altman tried to reassure the world that despite the recent drama, everyone is still on the same page. Altman said he is optimistic that OpenAI and Microsoft can continue to thrive under this new arrangement and provide continuity for their customers. “We have more unity, commitment and focus than ever before,” he said. “One team, one mission.”

It is unclear which team Altman was referring to.