Microsoft (MSFT) stock marked a historic high on Monday, propelled by the unexpected turn of events at OpenAI that saw Sam Altman ousted and subsequently joining Microsoft, causing ripples across the tech landscape. The Verge later reported that Altman’s move to Microsoft was still pending official confirmation.
Rishi Jaluria, managing director at RBC Capital Markets, dubbed the recent developments as the “most eventful” in over a decade of covering software. Despite initial concerns about potential disruptions, Altman and co-founder Greg Brockman joining Microsoft were seen as a significant win for the tech giant.
Microsoft shares closed at $377.44 on Monday, up over 2%, rebounding from initial declines after Altman’s departure from OpenAI was announced on Friday. In contrast, Alphabet (GOOGL) shares gained about 0.7% during the same trading session.
The uncertainty surrounding OpenAI’s future raised short-term concerns for Microsoft investors. However, analysts believe that with Altman onboard, any fundamental risks to Microsoft are now largely “contained.” Kirk Materne of Evercore ISI sees Altman’s hiring as potentially enhancing Microsoft’s long-term prospects, outweighing near-term risks.
Oppenheimer analysts Timothy Horan and Edward Yang characterized the situation as a “win/win” for Microsoft, while Wedbush analyst Dan Ives suggested that Altman’s move to Microsoft could have a significant impact on OpenAI, potentially leading key scientists and developers to transition to Microsoft.
Microsoft’s $10 billion investment in OpenAI earlier in the year indicates the company’s commitment to continue working on disruptive technologies like ChatGPT. However, the fallout at OpenAI is evident, with over 500 employees signing a letter urging the board’s resignation or threatening to leave and join Microsoft’s newly announced subsidiary run by Altman and Brockman.
The strategic advantage gained by Microsoft in the generative AI space is emphasized by its newfound status as a destination employer for talent in this field. Fred Havemeyer of Macquarie noted that Microsoft’s new AI team is poised to “hit the ground running,” potentially solidifying its position against competitors in the generative AI sector.
Shayne Heffernan
