Microsoft has hired OpenAI co-founders Sam Altman and Greg Brockman in the latest twist in the turmoil at the artificial intelligence startup. The news drove Microsoft stock to a record high on Monday.
Microsoft Chief Executive Satya Nadella announced in a Sunday blog post that Altman and Brockman "together with colleagues" will join the tech giant to run a new AI research team.
"We look forward to moving quickly to provide them with the resources needed for their success," Nadella said.
Nadella also reaffirmed Microsoft's partnership with OpenAI, which triggered the AI frenzy with last year's launch of ChatGPT. Microsoft owns 49% of OpenAI after reportedly investing more than $13 billion in the venture.
OpenAI announced Friday that Chief Executive Altman was leaving the company. The startup's board said it "no longer has confidence" in Altman's "ability" to lead. Brockman, OpenAI's president, and other OpenAI employees quit in response.
Microsoft Stock Rises On New Hires
Microsoft stock advanced 2.1% to close at 377.44 on the stock market today. In intraday trading, MSFT stock notched an all-time high of 378.87.
A growing consensus on Wall Street is that Microsoft came out ahead in the upheaval at OpenAI.
"This is, quite obviously, a phenomenal outcome for Microsoft," Stratechery analyst Ben Thompson said in a blog post.
Microsoft "already has a perpetual license" to all of OpenAI's intellectual property, he said. "You can make the case that Microsoft just acquired OpenAI for $0 and zero risk of an antitrust lawsuit."
Microsoft with Altman on board is now "in the driver seat of AI," Thompson said.
'A World Series Of Poker Move'
Importantly, Microsoft's hiring of Altman and the OpenAI brain trust keeps those workers away from rivals like Google parent Alphabet and Amazon, Wedbush Securities analyst Daniel Ives said in a client note.
"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," Ives said. "Instead, he is safely in Microsoft's HQ, now leading the company's key AI efforts, which we expect (to cause) many key scientists and developers to leave OpenAI and head directly to Microsoft."
Ives called Microsoft's hiring of the OpenAI talent "a World Series of Poker move for the ages." He reiterated his outperform rating on Microsoft stock with a price target of 425.
Oppenheimer analyst Timothy Horan maintained his outperform rating on Microsoft stock with a price target of 410.
"This is a win-win for Microsoft as it still has full access to the best LLMs (large language models) and now the team to possibly make the next great LLM and the best AI minds in the world to help implement AI," Horan said in a client note. "Microsoft has the best AI data and applications and most optimized AI infrastructure for LLM training and inferencing, in our view."
Microsoft Stock Is On 5 IBD Lists
Deutsche Bank analyst Brad Zelnick kept his buy rating on MSFT stock with a price target of 415.
"The outcome of this weekend's OpenAI roller coaster ride leaves Microsoft at the apex of the AI food chain and reinforces our view of Satya Nadella as one of the best CEOs in software," Zelnick said in a client note.
Microsoft stock is on five IBD stock lists: IBD 50, Leaderboard, Big Cap 20, Tech Leaders and Long-Term Leaders.
Plus, Microsoft is one of the Magnificent Seven stocks that have led the stock market rally this year.
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