Microsoft may have a growing AI problem on its hands

So ChatGPT, why are so many executives leaving OpenAI, the company that built you?

“Executive departure from a company like OpenAI can stem from several key factors,” the AI ​​chatbot recently responded, listing several potential causes of the tech company’s brain drain, including strategic changes, leadership style, and personal reasons .

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“The tech industry, especially in AI, can be extremely demanding,” said ChatGPT. “Executives may leave because of stress, burnout, or a desire for a more manageable workload.”

While these factors can contribute to turnover, the chatbot concluded that “the specifics often depend on the unique context of the organization and the people involved.”

The question was not rhetorical.

Related: What Is Sam Altman’s Net Worth? How does he make money?

Several top people at OpenAI recently left the company, which is backed by Microsoft (MSFT) including Mira Murati, Chief Technology Officer, Bob McCrew, and Barret Zoph, Vice President of Research.

In recent years, OpenAI has lost several researchers who played crucial roles in developing the algorithms, techniques and infrastructure, according to Wired.

OpenAI didn’t immediately respond to a request for comment, so we thought we’d get in ChatGPT’s two cents.

Microsoft CEO Satya Nadella may see OpenAI weaken his company’s financial results.

TheStreet/Shutterstock/Justin Sullivan/Getty Images

The Microsoft-backed company is raising funds

ChatGPT noted that regulatory and ethics concerns could be a reason to leave the company, stating that “navigating the evolving landscape of AI ethics and regulations can be challenging, and some leaders may prefer to exit rather than deal with the complexities “.

Several former employees told Wired that an ongoing shift toward a more commercial focus continues to be a source of friction.

Related: Analyst looks at BlackRock’s rating after AI partnership with Microsoft

In 2021, 23% of OpenAI job postings were for general research roles, while in 2024, general research accounted for only 4.4% of job postings.

After Tesla (TSLA) CEO Elon Musk, an early investor, has parted ways with the company, CEO Sam Altman has turned OpenAI into a profit-capped enterprise overseen by a board that doesn’t answer to investors.

“Leadership changes are a natural part of companies, especially companies that grow so fast and are so demanding,” Altman said in a post on X, the former Musk-owned Twitter.

“Obviously I’m not going to pretend it’s natural for it to be so sudden, but we’re not a normal company and I think the reasons Mira explained to me (there’s never a good time, anything that wasn’t sudden , and she wanted to do it while OpenAI was on the rise) makes sense,” he added.

The change didn’t seem to bother investors, who pumped $6.6 billion into OpenAI, Reuters reported on Oct. 2. That could value the company at $157 billion and solidify its position as one of the world’s most valuable private companies.

Most investors anticipate significant growth based on Altman’s predictions.

The funding attracted returning venture capital investors Thrive Capital and Khosla Ventures, Microsoft, OpenAI’s largest corporate backer, and new AI participation from Nvidia. (NVDA) .

OpenAI’s chief financial officer, Sarah Friar, told employees that the company will be able to provide liquidity through a tender offer to buy back its shares following the financing. However, Reuters said, citing an unnamed source, that no details and timing had been decided.

Earlier this year, the company allowed some employees to cash out their stock at a valuation of $86 billion.

Separately, OpenAI reduces its dependence on Microsoft data centers and provides its own computing capacity. Friar says Microsoft didn’t move fast enough to provide the company with computing power, according to The Information.

Instead, Microsoft aimed to reduce reliance on OpenAI technology as it increasingly competes in selling AI products, the report said.

The Redmond, WA-based software giant said it plans to expand its AI infrastructure spending to meet demand.

Analyst says OpenAI is losing ‘core concern’

CFO Amy Hood told analysts in July that “cloud and AI spending is almost all of our total capital spending.”

“Of that, about half is for infrastructure needs where we continue to build and lease data centers that will support monetization over the next 15 years and beyond,” she said.

Related: Open AI Burns Cash (and Loses Billions!)

Microsoft owns approximately 49% of OpenAI’s equity and provides computing resources for OpenAI through its Microsoft Azure cloud platform.

Oppenheimer downgraded Microsoft to outperform and removed the company’s previous price target, citing concerns about OpenAI, according to The Fly.

The firm said it believed the consensus estimates for revenue and EPS were too high, calling OpenAI’s losses, which could be in the range of $2 billion to $3 billion in 2025, its “primary concern.”

Enterprises have been slow to adopt AI, and the associated revenue is likely to disappoint, the firm said. That’s not good news, at least for now, for Microsoft’s bottom line.

The analyst added that with Microsoft investing in “once-in-a-generation” technology, Oppenheimer doesn’t think expanding margins will be a near-term priority.

More AI actions:

• Apple shares slide as high stakes iPhone 16 sputters
• Analyst Revises Price Target on Meta Shares as Parent Facebook Raises AI Spending
• Analyst looks at BlackRock stock valuation after AI partnership with Microsoft

Analysts at Truist had a different view of Microsoft.

The firm, which maintained its buy rating and $600 price target on the company, said its deeper dive into Microsoft’s cybersecurity business confirmed that it has become an “increasingly important” area for the software giant .

In a research note, Truist tells investors that Microsoft’s comprehensive security solutions are on a scale unmatched by competitors, which is likely to continue to be a “growth vector” over the long term.

The firm added that it remains “optimistic” about Microsoft’s potential to gain consolidation shares in the security stack.

Microsoft is scheduled to report earnings in the next few weeks, and Wells Fargo, which has an overweight rating on the company and a $515 price target, said its first-quarter results are somewhat harder to handicap given the significant pattern of intra-quarterly group. reset.

However, stronger-than-usual checks suggest the underlying momentum for Azure continues, Wells Fargo said. The firm said it expects the stock to benefit as more model clarity surfaces through FY25.

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