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

Key Points

  • Microsoft shares surged by 2.20% in heavy volume following the news of recruiting former OpenAI leaders Sam Altman and Greg Brockman.
  • Microsoft had initially invested $13 billion in OpenAI but has now begun to bring many of its managers and employees in-house.
  • Microsoft has been actively developing AI chips as a means to minimize its reliance on Nvidia. 
  • 5 stocks we like better than Microsoft

It was a swift turnaround for Microsoft Corp. NASDAQ: MSFT when OpenAI ousted CEO Sam Altman on November 17. However, by November 20, he had secured a new role heading an AI unit at Microsoft.

Co-founder Greg Brockman joined Altman at Microsoft, and reportedly, 700 of OpenAI’s 770 employees threatened to quit 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 mentioned that Microsoft had confirmed open positions for them within the tech giant. 

Microsoft shares experienced a 2.20% increase mid-session on November 20, with heavy trading volume.

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 pioneer Nvidia Corp. NASDAQ: NVDA produces the chips that OpenAI’s ChatGPT runs on. Microsoft is developing its line of AI chips to replace some or possibly all of Nvidia’s equipment.

Nadella stated, “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 an annual conference for IT professionals and developers, with announcements made in November 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 potential impact on Nvidia due to its in-house chip development, and Nvidia was also among the tech sector’s major price movers on November 20. 

In his X post, Nadella referred to the existing OpenAI team, expressing Microsoft’s anticipation of collaborating with interim OpenAI CEO Emmett Shear.

Investors are of the view that Microsoft will take on the role that OpenAI played in advancing the realm of generative AI. With Microsoft incorporating more operations in-house rather than overseeing OpenAI, it is likely to intensify research, development, and technology deployment.

On his X account, Brockman said that other OpenAI top managers were part of “one team, one mission,” suggesting a potential large-scale transition to Microsoft. He also tagged several OpenAI managers who have already committed to Microsoft.

Prior to considering Microsoft, you should listen to this.

MarketBeat tracks the recommendations made by Wall Street’s highly-rated and best-performing research analysts along with the stocks they suggest 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 holds a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better purchases.

View The Five Stocks Here

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