Microsoft Hedges Its OpenAI Risk by Bringing Ousted CEO Sam Altman In-House
The software giant looks to protect a big investment.
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Undoubtedly, the number of active traders will dwindle with each passing hour this week. Lighter volume often can accentuate moves, so fading momentum or the current market trend is seldom a winning move. If we see a continued move higher today, the bulls may feast on bear and turkey for the remainder of the week.
Over this past weekend, OpenAI, best known for its ChatGPT product, grabbed all the business headlines when its board of directors ousted co-founder and CEO Sam Altman. As to why he was removed, it is left to speculation because a broad-based reason was provided, but communication between Altman and the board appears to be the critical issue.
Microsoft MSFT moved quickly to hire Altman as the head of its AI division. The irony here is that Microsoft, which is a holding of the Action Alerts PLUS portfolio, is a significant financial backer of OpenAI. One could argue that Microsoft now can have its cake and eat it, too. Micrsoft has Altman but still enjoys the advancements OpenAI can make with its new leadership.
It is more of a risk management move. Microsoft hedged its risk by bringing Altman in-house if OpenAI stumbles without him. After all, Microsoft has invested $13 billion in OpenAI. Although that's an insignificant sum compared to Microsoft's $2.8 trillion market cap, failure at OpenAI would have a significant writedown impact on Microsoft's bottom line in the near term.
Despite the quiet data day here on Tuesday, we still get the Federal Open Market Committee (FOMC) minutes later this afternoon. Given the recent muted inflation data, any hawkishness associated with the notes will be brushed aside as stale thoughts. I will be more curious to see the existing home sales data. We have reached a point where the higher mortgage rates should be reflected in the data.
I tend to shy away from establishing new positions during holiday-shortened weeks, and in light of my travel plans this week it will be a market for observation rather than trading for me.
(MSFT is a holding of Action Alerts PLUS. Want to be alerted before the portfolio buys or sells these stocks? Learn more now.)
At the time of publication, Byrne had no positions in the stocks mentioned.
