The OpenAI shakeup has rocked Silicon Valley, leaving some techies worried about the future of artificial intelligence

Sam Altman, CEO of OpenAI, attends the Asia-Pacific Economic Cooperation (APEC) CEO Summit in San Francisco, California, USA on November 16, 2023.

Carlos Baria | Reuters

Much of Silicon Valley has pinned its hopes and fortunes over the past few years on the generative artificial intelligence technologies that OpenAI has helped popularize.

Many industry experts point to ChatGPT's debut late last year as an iPhone-like moment, sparking a potential shift in the way people interact with computers through text prompts that can generate creative, seemingly human-like text.

as well as Apple The late Steve Jobs served as the company's revered figurehead, projecting the appeal of the iPhone and personal computers to the masses, and OpenAI also had its own charismatic leader in Sam Altman.

Since his surprise ouster on Friday, when Altman stepped down as CEO, the Apple comparisons have flowed freely. Jobs was fired as Apple's CEO in 1985, a move that lives on in Silicon Valley history because, upon his return in 1997, Apple found a path that eventually made it the most valuable company in the US.

Altman, who previously ran startup accelerator Y Combinator, has spent the past year cozying up to world leaders and making regular appearances at tech events, turning the 38-year-old executive into an industry celebrity in the mold of Jobs. Meta CEO Mark Zuckerberg, Amazon Founder Jeff Bezos and Tesla CEO Elon Musk.

Along with Altman, OpenAI's board ousted Greg Brockman as chairman. Later on Friday, Brockman said he was leaving the company.

“What happened today at OpenAI is a board coup the likes of which we haven't seen since 1985, when Apple's then-board ousted Steve Jobs,” said longtime startup investor Ron Conway at X on Friday night. post. “It's shocking; it's irresponsible; and it doesn't do Sam and Greg or all the OpenAI builders justice.”

Efforts are already underway by OpenAI's investors to bring Altman back, according to people familiar with the matter. Microsoft, Tiger Global, Sequoia Capital and Thrive Capital are among the top OpenAI backers trying to reinstate Altman, said the people, who asked not to be identified because the discussions are confidential. The Verge reported Saturday that Altman is “ambivalent” about the possibility of a return.

Airbnb CEO Brian Chesky referred Altman to X post As “one of the best founders of his generation” who has “made a huge contribution to our industry”.

Silicon Valley reacts to OpenAI

Matt Schlicht, CEO of startup Octane AI, told CNBC that Altman and Brockman, formerly Stripe's chief technology officer, “made technology available that we've only ever dreamed of,” calling it “the most exciting and powerful of our lives.” development.”

Octane is one of a number of new startups using so-called large language models, which OpenAI places under its GPT family of software tools. Schlicht said the technology so far “allows us to put human-level intelligence into our code, and we've helped entrepreneurs generate more than half a billion dollars in revenue because of it.”

“I've known Sam and Greg for over a decade, and they are incredible and inspiring leaders,” Schlicht said. “When I heard of their untimely passing, I was immediately filled with sadness. Innovation in the world has come to an abrupt halt.”

OpenAI Co-Founder Greg Brockman Reportedly Stepping Down Following Sam Altman's Departure

Ryan Jansen, CEO of Zenlytic, shared Schlicht's sentiment.

“The AI ​​community is reeling,” Jansen said, adding that technologists are confused by the circumstances surrounding Altman's firing and what it means for OpenAI going forward.

“Sam and OpenAI were the catalyst that showed the world what AI technology can do,” Jansen said. “A lot of the excitement and activity in artificial intelligence today is directly due to their pioneering work.”

Whether or not Altman returns, the turmoil at OpenAI could give competitors an edge in what has quickly become a highly competitive market for advanced LLMs. From heavily funded startups like Anthropic and Cohere to cloud computing giants Google and AmazonCompanies are likely “looking for the next best alternative” given the perceived volatility in OpenAI, said industry analyst Patrick Moorhead.

“They're not the only game in town,” Moorhead said.

Josh Wolff, a partner at venture firm Lux Capital, said OpenAI is gaining huge traction at a time when companies are deciding which models to use as building blocks.

“There was a perception of a stable, predictable, reliable reputation going forward and engagement and communication with the industry,” Wolff said. “The sudden capriciousness of this move suggests complete unpredictability, which is scary for companies that plan to work with or trust OpenAI.”

The unusual structure of OpenAI

A large part of the challenge of understanding OpenAI is its own Unusual structure of the company. The OpenAI board oversees the nonprofit organization, of which the corporate entity is a part, and “acts as the overall governing body for all OpenAI activities,” according to a blog post announcing Altman's ouster.

The post said a “review process conducted by the board” concluded that Altman “was not consistently candid in his communications with the board, which hindered his ability to carry out his responsibilities.”

The firing of a high-profile Silicon Valley startup CEO usually involves wrongdoing, not just philosophical differences about where the company is headed.

Several investors told CNBC that OpenAI's hybrid model presented a red flag from the start, in part because the incentives could so easily go wrong. Now, they say, the company risks a severe brain drain if top talent chooses to follow Altman to his next project or an industry competitor.

At the same time, Altman has the advantage of making such a name for himself that he will have no problem raising money for a new project from investors who see him as the next big tech luminary.

“Sam Altman is my hero,” said former Google CEO and X investor Eric Schmidt. post. “He built a company from nothing to a $90 billion valuation and changed our collective world forever. I can't wait to see what he does next. I, and billions of others, will benefit from his future work – it will. It's just incredible.”

Eric Schmidt, former CEO of Google, arrives at the inaugural AI Insight Forum at the Russell Building on Wednesday, September 13, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

Airbnb's Chesky wrote that he has spoken with Altman and Brockman and that they have his “full support.”

“I am saddened by what happened,” Chesky wrote. “They and the rest of the OpenAI team deserve better. He added in a separate post that Altman is ‘one of the best founders of his generation.'

As for Microsoft, with CEO Satya Nadella reportedly reeling from the shakeup, some venture capitalists wondered if the company might be so clueless as to what was in store for the billions they poured into the company.

“I imagine Microsoft might ask for a board seat the next time they decide to spend $15 billion on a startup,” said Zachary Lipton, a professor of machine learning and operations research at Carnegie Mellon University.

Industry analyst Moorhead said Microsoft could “figure out how to buy this company and put Sam at the helm.”

“This is the first play, he's potentially looking at ways to remove the current board of directors, put a new board of directors back in, and then bring Sam and company back — make sure the group stays together,” Moorhead said.

Despite the current chaos, Carnegie Mellon's Lipton said he expects investors to remain bullish on AI.

“This story has elements of corporate and ideological discord, but there isn't even a whiff of diminished promise,” Lipton said.

— CNBC's Laura Kolodny contributed to this report

WATCHING: OpenAI says Sam Altman is stepping down as CEO because “the board no longer has confidence.”

OpenAI says Sam Altman steps down as CEO after board loses confidence