The OpenAI Soap Opera — and the One Stock to Benefit from the Turmoil

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Ironically enough, ChatGPT developer OpenAI isn’t publicly listed, although it’s a hot topic of conversation among stock traders. However, the lack of a stock for OpenAI doesn’t mean investors can’t take action.

Even more than inflation, the top-of-mind motif of 2023 among stock traders has been artificial intelligence or AI. More specifically, investors have sought exposure to companies immersed in generative AI or “gen-AI,” as this emerging technology rapidly gains traction.

Yet, even as gen-AI captures Wall Street’s imagination, all isn’t well at OpenAI. Investors are quickly discovering that OpenAI isn’t invulnerable, but as usual, commotion brings opportunities for astute stock traders.

Altman’s sudden ouster

A lot has happened during the past week in the world of OpenAI. The company’s board of directors unexpectedly forced co-founder Sam Altman out of the CEO position. According to The Wall Street Journal, OpenAI’s board claimed that Altman wasn’t “consistently candid in his communications.”

Furthermore, OpenAI’s board alleged that Altman’s actions hindered the company’s “ability to exercise its responsibilities.” Consequently, the board concluded that it “no longer has confidence” in his “ability to continue leading OpenAI.”

In a posting on X (formerly known as Twitter), Altman seemed to take the high road in his response:

What seems to bother onlookers and commentators about Altman’s ousting is the lack of details. Surely, people want to know exactly how his actions prevented OpenAI’s “ability to exercise its responsibilities.” For the time being, it appears that Altman isn’t prepared to discuss the matter.

Still, the support for Altman has been quite visible. OpenAI co-founder and President Greg Brockman quit the company, and reportedly, hundreds of staff members also threatened to leave in the wake of Altman’s expulsion.

Furthermore, The Wall Street Journal reported that OpenAI’s investors “are making efforts to bring Altman back. Not only that, but “some of OpenAI’s corporate customers are looking for alternatives.”

I suspect this resonates with so many people because we can all understand the frustration of being kicked out of a group without being given a specific, valid explanation.

The Wall Street Journal stated, “The exact reason for Altman’s firing couldn’t be determined,” so it’s only natural that the public would side with Altman, who helped cultivate OpenAI into the gen-AI juggernaut it eventually became.

OpenAI’s loss is this company’s gain

Despite calls from the public to reinstate Altman as CEO, OpenAI’s board instead opted to hire former Twitch head Emmett Shear for the position. Of course, it’s too soon to make any reasonable assessments of Shear’s leadership at OpenAI.

All of this raises the question of what Microsoft’s (NASDAQ:MSFT) leadership thinks about OpenAI’s CEO transition. After all, Microsoft has invested $13 billion in OpenAI. However, Microsoft Chairman and CEO Satya Nadella dispelled any notions of discontent in an official blog posting recently.

“We remain committed to our partnership with OpenAI,” the posting assured.

The blog posting added, “We look forward to getting to know Emmett Shear” and OpenAI’s “new leadership team and working with them.” Of course, it remains to be seen if Nadella and Microsoft will actually stand by Shear and OpenAI in the coming quarters.

Most likely, Microsoft will continue to invest in OpenAI since it has already sunk so much capital into the company. Besides, Microsoft has already embedded ChatGPT’s gen-AI functionalities into a number of products, including its Bing search engine and Azure cloud-computing platform.

This wasn’t the head-turning part of Microsoft’s blog posting, however. What really caught investors’ attention was the company’s announcement that “Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team.”

Thus, now Microsoft will not only have a financial stake in OpenAI, but it will also get direct access to the talent that made ChatGPT possible. Clearly, Microsoft looks like the winner amid the turmoil that has befallen OpenAI this month.

Meanwhile, OpenAI has to pick up the pieces and rebuild itself under new, less familiar leadership. This might sound like a loss for Microsoft as a major OpenAI investor, but it’s ultimately a net win for Microsoft as the company onboards Altman and Brockman.

For investors, this means Microsoft stock could be unstoppable in 2024 if the trend of gen-AI growth persists. So even if you can’t directly invest in OpenAI — and frankly, you might not want to at this point — you can still consider a share position in a technology giant with OpenAI’s top talent joining the team.