When a company invests$13 billion in a startup, as Microsoft has with OpenAI, you would expect to get at least a few minutes prior notice when its board fired its market-leading CEO. Instead, news that OpenAI was firing Sam Altman hit everyone outside the board like a thunderbolt. Microsoft CEO Satya Nadella was probably not amused. But, as things shake out, he has reason to smile. 

After OpenAI's attempt to backtrack from their shocking move failed to gain traction over the weekend, Nadella decided Microsoft would hire Sam Altman and former OpenAI President Greg Brockman. At Microsoft, they will lead a "new advanced AI research team." Brockman, another OpenAI co-founder, had quit in protest of Altman's firing.

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It appears it won't just be Altman and Brockman who will push ChatGPT and other OpenAI-based technology at Microsoft. 505 of OpenAI's over 700 employees wrote in an open letter that unless the OpenAI board quits, they "may choose to resign from OpenAI and join the newly announced Microsoft subsidiary." Further, "Microsoft has assured us that there are positions for all OpenAI employees at this new subsidiary should we choose to join."

Even OpenAI co-founder and board member Ilya Sutskever, who voted to fire Altman, signed this letter and has had second thoughts. Sutskever wrote, "I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together, and I will do everything I can to reunite the company.

Since that letter was published, almost all OpenAI employees have signed it, according to  Maggie Hott, head of ChatGPT Enterprise & Account Associate teams. For his part, Altman is sure "We are all going to work together some way or other, and I'm so excited. One team, one mission."

After all, as Angela Jiang, a member of the OpenAI Global Affairs Team, tweeted, "OpenAI is nothing without its people." While some people have reacted sarcastically to the idea of an AI company valuing people, Jiang is right. AI programs are no replacements for bright people, and OpenAI is its engineers, developers, and visionaries. 

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Nadella has kept saying polite things about OpenAI publicly, such as, "We remain committed to our partnership with OpenAI and have confidence in our product roadmap, our ability to continue to innovate with everything we announced at Microsoft Ignite, and in continuing to support our customers and partners." 

But, in the same tweet, he also said, "We're extremely excited to share the news that Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team. We look forward to moving quickly to provide them with the resources needed for their success."

Altman added, "We are committed to fully providing continuity of operations to our partners and customers. The OpenAI/Microsoft partnership makes this very doable."

What will this look like? There are reports that Altman and Brockman may yet return to OpenAI -- if, and it's a big if -- the board members who fired him quit. 

I'm confident that Nadella will do what's best for Microsoft. I don't know exactly what this will look like. My colleague, David Gewirtz, sees three ways forward: OpenAI goes its own course with whoever's left; Microsoft competes with OpenAI; or Microsoft acquires OpenAI.

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I see another way forward. For all intents and purposes, if Microsoft does indeed hire essentially everyone at OpenAI, the company doesn't need to compete with OpenAI. It's game over for OpenAI. The almost three trillion dollar enterprise won't need to buy it.

Before all this broke, OpenAI was seeking a valuation of$90 billion, and it looked like it would get it. 

But now, instead of paying anything, Microsoft could get all of OpenAI's engineers for the price of picking up their salaries. Talk about a deal!

As Macquarie analyst Fred Havemeyer said, "We see an opportunity where Microsoft ends up consolidating and essentially acquiring OpenAI without actually having to tender any sort of acquisition." Exactly. 

The stock market agrees. Microsoft shares rose 2.1% to an all-time high close of$377.44 on Monday. That beat the previous record of$376.17 and gave the tech giant a total valuation of about 2.75 trillion dollars. Not bad! 

Technically this is a big deal for Microsoft as well. The company has stated that at Microsoft, "Artificial intelligence (AI) is the defining technology of our time." As Bill Gates recently said when he saw OpenAI ChatGPT at work, "I had just seen the most important advance in technology since the graphical user interface." As you may recall, he took the idea of the GUI and turned it into the dominant desktop of the last 40 years: Windows. 

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In its last quarterly earnings, Microsoft reported that the above-forecast use of AI helped drive a 29% year-over-year increase in revenue for Microsoft's cloud business. Nadella added at the time, "We are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers."

That's not just hot air. At Microsoft Ignite, Microsoft announced one AI initiative after another. This included new versions of Copilot to help people get work done beyond programming; GPT-4 Turbo with Vision, which will let GPT work with video; and Azure AI Studio, for companies that want to build their own generative AI programs.

Put it all together, and it seems crystal clear to me that not only is Microsoft hiring all of OpenAI a smart move, but really, it's a necessary one. Microsoft must have what OpenAI was delivering, and hiring Altman and others is a sure-to-win move.  

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