It was a whirlwind weekend at OpenAI after the board ousted CEO Sam Altman on Friday, which led to pleas from employees and investors to bring him back, only for him to join Microsoft (MSFT) early Monday morning after talks for him to return the company failed. RBC Capital Markets Software Equity Analyst Rishi Jaluria says the move is "a huge coup for Microsoft," and that bringing Altman on board is "really the best-case scenario for Microsoft given everything that transpired since Friday." As for what the move means for the Microsoft-OpenAI relationship, Jaluria expects the two companies to continue to work together, but it "remains to be seen" if Microsoft will invest net new money in the partnership. "It's kind of Microsoft wins no mater what type of scenario," Jaluria added.
SEANA SMITH: Rishi, it's good to see you. So the first question obviously to you is, how big of a win is this for Microsoft getting Sam Altman to lead their new AI team?
RISHI JALURIA: Yeah, absolutely. Thanks so much for having me. Look, this is a huge coup for Microsoft. I think there's no getting around that. This is probably the most eventful weekend I've ever seen in my decade plus covering software.
And the worries that I think everyone had is the pace of innovation would slow down, some of the AI halo around Microsoft that it's been enjoying in its multiple would start to dissipate, customers would get worried. And I think by bringing in Sam and Greg, right-- and Sam is obviously the ultimate visionary when it comes to AI-- it's really the best case scenario for Microsoft, given everything that transpired since Friday.
BRAD SMITH: Rishi, I mean, like many of us out there, I imagine at some point over the weekend, you were probably squinty-eyed into your phone early hours or late hours of the night and trying to figure out, OK, what does all of this mean for OpenAI's future, But as well, for Microsoft? Because this was about $10 billion that they were set to spend or earmarking to spend over several years to really further this investment in generative AI.
How much of that perhaps do they get the opportunity to pull back at this point? Because according to some reports by Semafor, it really hadn't been at least dispersed in full and perhaps not even keeping pace with how much investors expected it to be dispersed to this time.
RISHI JALURIA: Yeah. From my perspective, I think Microsoft is kind of in a situation where they have multiple ways they can win. Obviously, this relationship with OpenAI is going to continue. I don't think that goes away. I think they will continue to use GPT and nothing's going to change there. However, they put net new money to work at OpenAI? That remains to be seen.
And at the same time, obviously, they've already been working on their own AI technology. And I think the pace at which Microsoft continues to develop their own tech that will probably be competitive with OpenAI, I think that will accelerate. So that's really how I see this playing out is. It's kind of a Microsoft wins no matter what happens type of scenario.