By Therese Poletti
Microsoft may not necessarily be the big winner in the OpenAI soap opera
It might be easy to conclude from the past four days of Silicon Valley’s ongoing soap opera at OpenAI that Microsoft Corp. is set to emerge as the victor in artificial intelligence, ready to quash all rivals, large and small.
Microsoft (MSFT) has seemingly gained the most from the abrupt ouster of OpenAI Chief Executive Sam Altman and then his hiring by CEO Satya Nadella. After all, Microsoft owns an approximate 49% stake in OpenAI’s for-profit entity. It also is said to have a perpetual license to OpenAI’s intellectual property, including ChatGPT, the chatbot that has helped fuel the AI frenzy in the past year. (Microsoft did not respond to a request for comment on its licensing agreement with OpenAI).
Instead, though, what the the ensuing saga tells us is that it is still very early days in AI, where everything is quickly evolving, amid one of the most exciting and scariest times in technology.
“It’s like 1906 with the automobile,” said James Currier, general partner at NFX, an early stage venture-capital firm. “We know it’s important, we just don’t know if it will be Ford,” or any other of a number of companies, to emerge as a major winner. “We are only three, four years in,” he said. “This is just another skirmish in a long battle between forces.” He noted that it is entirely feasible there will not be a consolidation of power in the AI space.
Matthew Prince, co-founder and chief executive of Cloudflare Inc. (NET), said on X, formerly Twitter, that he believed Microsoft was not the winner of the events of the past few days.
“I think the chances of the senior OpenAI folks still being at Microsoft in 3 years is asymptotically approaching zero,” Prince said in his tweet, adding that a team driven by the clear mission and independence at OpenAI may not be so motivated by making Office 365 spreadsheets better.
It is not immediately clear what will happen with the popular ChatGPT, if more staff at OpenAI defect to Microsoft or other companies. Salesforce Inc. (CRM) co-founder Marc Benioff said on X that OpenAI employees would be welcome at his cloud-software company. Microsoft hosts OpenAI’s software on its Azure cloud-services platform, but it’s unlikely that a perpetual license to use the software will let it to further develop ChatGPT.
“We think a skeleton crew of employees at OpenAI can likely keep ChatGPT running with the resources available through its long-term Microsoft partnership,” Macquarie analyst Frederick Havemeyer wrote in a note to clients. “However, if ChatGPT performance degrades, we think an exodus of ChatGPT users to alternatives (e.g., Bing Chat, Anthropic’s Claude) or a product shipped by Mr. Altman’s new team would be likely.”
Other companies working on large language models or creating rival products includes some Big Tech companies that Wall Street has written off in terms of being immediate winners in the AI race, such as Amazon.com Inc. (AMZN) and Alphabet Inc.’s (GOOG) (GOOGL) Google. In addition, Elon Musk, one of the early founders of OpenAI, was able to build Grok, a bot that will be available to X’s premium users, in just several months.
“It’s likely there will be different mathematical models that will completely eclipse those transformer models by Google,” Currier said, referring to a 2017 paper by Google researchers that introduced a new deep-learning architecture called a transformer, that revolutionized AI at the time. “The shakeup is a sign we are still early in the market…And it opens up more surface area for more startup s to have an impact.”
Many Silicon Valley startups and their founders have been glued to the OpenAI saga, which also highlighted the debate about the ethics and risks of AI and the fears of creating an artificial general intelligence (AGI), in which a machine can learn and think like a human. There will be many more shakeouts to come in this emerging field.
-Therese Poletti
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11-20-23 2223ET
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