Microsoft’s bad situation

Hey y’all, it’s Austin Carr in Boston. OpenAI left Microsoft with no easy choices. But first...Three things you need to know today:• OpenAI [View in browser]( [Bloomberg]( [by Austin Carr]( Hey y’all, it’s Austin Carr in Boston. OpenAI left Microsoft with no easy choices. But first... Three things you need to know today: • OpenAI in “intense discussions” [to resolve issues]( • Nearly all of OpenAI’s staff [threatened to quit]( • Elon Musk is still [defending his post]( Acqui-hire quagmire After a chaotic few days of[boardroom coups]( and[attempted counter-coups]( at OpenAI, Microsoft Corp. said it would hire Sam Altman to lead a new artificial intelligence research team. It was a[stunning turn for Microsoft](, which had bet big on OpenAI and its former chief executive officer, Altman. But it’s not an ideal outcome for Altman or Microsoft. Which is why a group of OpenAI investors is still [pushing for Altman’s return]( as chief, a move Microsoft CEO Satya Nadella [said he’s open to](. Nearly all of OpenAI’s[roughly 770 employees]( have signed a letter to[OpenAI’s board threatening to quit unless its directors]( resign over their handling of Altman’s termination. “Microsoft has assured us that there are positions for all OpenAI employees at this new subsidiary should we choose to join,” the letter read. If that were to pass, it would effectively be an acquisition without a term sheet, which at first would seem like a coup for Nadella. While Microsoft shares[rose to an all-time high]( following the news, Altman’s hiring would come with complications. For one, onboarding droves of new employees will be insanely costly, particularly in a[year that Microsoft froze salaries]( for full-time workers. On top of that, 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 employees who do join Microsoft can’t simply replicate the work they were doing on OpenAI properties like GPT-5 without inviting a nightmare of claims over trade-secret theft. That’s partly why there’s been such a strong push to reinstate Altman at OpenAI, rather than have him try to conjure something as significant from scratch. Nadella has suggested Microsoft would make the best of a bad situation. He stressed publicly that Altman would have autonomy at Microsoft, citing LinkedIn, GitHub and the maker of Minecraft as examples of Microsoft units that effectively operate independently. The message is likely aimed at winning over OpenAI engineers and computer scientists wary of joining a corporate behemoth with some 200,000 employees and sprawling business divisions. These are people who think deeply about how AI could influence humanity, not about how it could improve Bing. And there are plenty of other companies they could join that share the sort of lofty mission OpenAI has evangelized. “Never got so many job offers so quickly in my life,” Jerry Tworek, an OpenAI researcher,[posted]( on the social network X. Greg Brockman, another OpenAI founder displaced in the chaos, said he’s joining Altman at Microsoft, along with at least three other top researchers. “We are going to build something new & it will be incredible,”[Brockman posted](. Even if Altman’s AI team is granted independence, it’d inevitably come against preexisting AI and research groups inside Microsoft attempting to tackle similar problems. Bloomberg reported in June that some inside Microsoft were displeased that Nadella and Chief Technology Officer Kevin Scott[outsourced so much AI work]( to an untested startup in lieu of betting on homegrown projects. It’s possible those tensions could be exacerbated inside Microsoft as various teams vie for resources. Yet another headache will be Altman’s myriad side hustles, including the controversial[crypto endeavor Worldcoin](, which seeks to [scan the eyeballs]( of every human on earth, or his recent attempt to raise money for an [AI chip company]( to take on Nvidia Corp. Just last week[Microsoft unveiled its own custom-designed chips](. Microsoft shareholders surely won’t want their all-star hire competing on this front. Nadella told Bloomberg TV in an interview Monday that they would “work through the governance aspects” of Altman’s outside ventures but said he thought Altman would’ve only accepted the job at Microsoft if he “wants to spend his full time” there. In a series of posts, Altman sought to reassure the world that despite all the drama lately, everyone is still aligned. Altman said he’s optimistic OpenAI and Microsoft can continue to thrive under this new arrangement and provide continuity for their customers. “We have more unity and commitment and focus than ever before,” he said. “One team, one mission.” It’s unclear which team Altman was referring to. —[Austin Carr](mailto:acarr54@bloomberg.net) The big story Emmett Shear was tapped as[interim CEO of OpenAI]( after Sam Altman was fired last Friday. The former Twitch CEO is a tech veteran and an advocate for slowing AI’s growth. One to watch [Watch the Bloomberg Technology analysis]( of Sam Altman’s firing. Get fully charged Oracle’s Larry Ellison outlasted another shareholder [attempt to oust him](, with more investors voting to keep him than years past. The CEO of X publicly acknowledged advertisers are leaving the platform [following accusations that Musk is antisemitic](. OpenAI’s interim CEO had used social media to [post his unfiltered thoughts](, lacking the typical corporate filter. 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