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Microsoft’s Bold Step Pays Off: Shares Soar After Launch of AI Division

Key Points

  • Microsoft shares jumped 2.20% in heavy volume on news that it hired former OpenAI executives Sam Altman and Greg Brockman. 
  • Microsoft had invested $13 billion in OpenAI but is now bringing many of its managers and employees in-house.
  • Microsoft has been developing AI chips to reduce its reliance on Nvidia. 
  • 5 stocks we like better than Microsoft

It was a fast roller coaster ride for Microsoft Corp. NASDAQ: MSFT in a story still developing: OpenAI fired CEO Sam Altman on November 17. However, by November 20, he had a new gig running an AI unit at Microsoft.

Co-founder Greg Brockman joined Altman at Microsoft, and a reported 700 of OpenAI’s 770 employees threatened to quit the company in a letter and follow Altman and Brockman to Microsoft unless the current board resigns. 

On November 20, Microsoft CEO Satya Nadella announced on social media Platform X that Altman and Brockman were joining Microsoft.

Microsoft jobs for OpenAI employees

The OpenAI employees’ letter also said Microsoft had assured them open positions were waiting for them at the tech giant. 

Microsoft shares were up 2.20% mid-session on November 20. Trading volume was heavy.

Among technology stocks, Microsoft was among the top 10 gainers within the Technology Select Sector SPDR Fund NYSEARCA: XLK.

Microsoft began investing in generative AI specialist OpenAI in 2019, and two years later had upped its investment from $1 billion to $10 billion. In 2023, the total investment had risen to $13 billion.

Microsoft also provides computing power for OpenAI, which could mean ever-higher server billings for Microsoft as businesses scurry to integrate generative AI into their apps.

Microsoft chips to replace Nvidia

S&P semiconductor juggernaut Nvidia Corp. NASDAQ: NVDA makes the chips that OpenAI’s ChatGPT runs on. Microsoft is working on its version of AI chips to replace some or possibly all of Nvidia’s gear.

Nadella wrote, “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.”

Microsoft Ignite is a yearly conference for IT professionals and developers. It took place in November, with announcements including new Microsoft-designed AI chips. The Azure Maia is an AI accelerator chip designed to run cloud-based training and inferencing for AI workloads such as OpenAI models, Bing, GitHub Copilot and ChatGPT.

Nvidia shares among big S&P movers

Microsoft has downplayed any fallout to Nvidia due to its in-house chip development, and Nvidia was also among the tech sector’s biggest price movers on November 20. 

In his X post, Nadella referred to the existing OpenAI team, saying Microsoft looked forward to working with interim OpenAI CEO Emmett Shear.

Investors are taking the position that Microsoft will be assuming the role that OpenAI played in advancing the field of generative AI. With Microsoft bringing more operations in-house rather than overseeing OpenAI, it will likely ramp up research, development and technology deployment.

On his X account, Brockman said that other OpenAI top managers were part of “one team, one mission,” which may imply that there will be a mass migration to Microsoft. He also tagged several OpenAI managers who have already committed to Microsoft.

Before you consider Microsoft, you’ll want to hear this.

MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Microsoft wasn’t on the list.

While Microsoft currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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