Upended overnight, the red-hot generative AI market is suddenly up for grabs – Fortune
Hello and welcome to Eye on AI.
We started off last week’s newsletter declaring that it had been a big week for OpenAI. It turns out the DDoS attack, data partnerships announcement, GPTs buzz, and pausing of ChatGPT Pro subscriptions due to overwhelming demand was nothing compared to what was to come.
On Friday night, OpenAI cofounder and CEO Sam Altman was abruptly fired by the company’s board. To say this was shocking is an understatement; Altman had just launched the fastest growing consumer tech product in history (ChatGPT), was in the process of leading the company to a soaring $85+ billion valuation, and was highly respected in and outside of the company. The blog post announcing the “leadership transition” offered no concrete reason or details, and even Microsoft, the company’s close partner with more than $10 billion invested, was blindsided, with CEO Satya Nadella learning of Altman’s firing just moments before it was made public.
Immediately after the news broke, the dominos of OpenAI started falling like a Rube Goldberg machine. OpenAI cofounder and president Greg Brockman resigned in solidarity and after being removed by the board as chairman himself, and the company’s top engineers followed suit. Dozens more employees quit as a movement to reinstate Altman — backed by Microsoft, other investors, and various tech industry executives — started to take serious shape. The other shoe dropped Sunday night when Nadella announced Altman and Brockman were joining Microsoft to lead a “new advanced AI research team,” and then again on Monday when nearly every one of OpenAI’s 770 employees signed a letter threatening to follow Altman to Microsoft if the board members don’t resign and reinstate the ousted leaders.
If the board sticks to its guns, it looks like OpenAI may cease to exist. But even if Altman and the other defecting employees return to OpenAI, it’s clear these events have completely ripped open the generative AI landscape. The fallout could be a golden ticket for competing AI startups and tech giants, and it’s already starting a fierce battle for talent. Even Microsoft, who many were quick to declare the big winner in the situation, is on shaky ground.
As the chaos ensued over the weekend, The Information reported that more than 100 OpenAI customers contacted Anthropic, which recently cozied up with Amazon for cloud computing and an investment of up to $4 billion and just today unveiled Claude 2.1. Others reached out to startup rival Cohere, are considering tapping Meta’s Llama 2, and are looking to switch their cloud providers from Microsoft Azure to Amazon Web Services or Google Cloud.
“We chose OpenAI because of its perceived stability,” DSQ Solutions founder Charlie Dolan told Business Insider when discussing switching to Azure and Anthropic.
As is often true in tech, talent is quickly becoming central to the upheaval. AI startups like Cohere and Adept rushed to poach from OpenAI, and Google’s DeepMind received an uptick in resumes. Executives and AI leaders including Inflection AI CEO Mustafa Suleyman, Nvidia senior AI scientist Jim Fan, and Salesforce CEO Marc Benioff are publicly wooing OpenAI researchers and engineers, while many more are likely doing so behind closed doors. When one commenter playfully called out Fan for poaching, he replied that there’s “no better time to do so.”
In a podcast interview with tech journalist Kara Swisher recorded yesterday, Nadella noted the stiff competition for AI talent and pointed to it as the reason he’d welcome all OpenAI employees to the new Altman-led “advanced AI research team.”
“I just wanted to make sure that in a world where people have choices, that if they’re going to leave OpenAI, Microsoft is a choice for them,” he said.
There was no sense this would be his preferred outcome, however. While calm, Nadella appeared to be in full crisis comms mode as he insisted repeatedly that everything is totally fine and actually nothing has even changed at all. He’s continuously punted to the OpenAI board and made clear that the potential total implosion of OpenAI would be on them, almost as if he’s daring them to go through with it. And indeed, sources speaking to The Verge characterized the current arrangement as a “holding pattern” and said that Altman joining Microsoft isn’t a done deal.
When OpenAI’s “wild weekend” started to unfold, many were quick to declare Microsoft the big winner. The tech giant already had the cloud infrastructure, access to OpenAI’s technology, almost half the equity, and now just scored the beloved AI kingpin and what seemed like a ton of leverage and power.
“You can make the case that Microsoft just acquired OpenAI for $0 and zero risk of an antitrust lawsuit,” Ben Thompson wrote in Stratechery.
But with more power comes significantly more responsibility. Instead of enjoying the high-reward, low-risk benefits of a partnership, Microsoft is essentially absorbing the apparent global leader in AI through a coup of sorts. In addition to exposing Microsoft to greater anti-competitive scrutiny, this whole saga was a major rug pull for Microsoft and exposed how OpenAI’s wonky governance structure had the tech giant in an extremely high-risk situation all along. Despite Nadella’s insistence otherwise, everything has changed.
And with that, here’s the rest of this week’s AI news.
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And with that, here’s the rest of this week’s AI news.
Sage Lazzaro
sage.lazzaro@consultant.fortune.com
sagelazzaro.com
The U.K. won’t regulate AI “in the short term” out of concern it could stifle industry growth. Viscount Jonathan Camrose, the U.K.'s first minister for AI and IP, made the announcement late last week at a Financial Times conference, and the government later confirmed the stance in a separate statement. The news comes as the E.U., U.S., China and several other countries move toward regulation.
President Biden and Chinese President Xi Jinping talk — but make little movement on — AI at the Asia-Pacific Economic Cooperation conference. That’s according to The Washington Post. The two leaders agreed to “address the risks of advanced AI systems and improve AI safety through U.S.-China government talks,” according to a White House statement released after the hours-long meeting. Biden, however, maintained that two countries are competitors and U.S. export controls over AI chips to China will remain in place. Noting that there were expectations for more, such as a comprehensive AI arms control agreement, the Center for AI and Digital Policy called it a “restrained outcome.”
A bipartisan group of U.S. Senators introduce the AI Research, Innovation, and Accountability Act. Among other mandates meant to increase transparency and detection of AI-created content, the legislation would require the Department of Commerce to issue standards for testing and evaluating “critical impact AI-systems” used in criminal justice, critical infrastructure, and biometric identification. It’d also require companies in these areas to submit risk assessments to the Commerce prior to deployment, and would require transparency reports from companies using AI to make decisions about housing, employment, credit, education, healthcare, or insurance in a way that poses a significant risk to fundamental constitutional rights or safety.”
Stability AI VP of Audio resigns over disagreement with the company’s stance that training generative AI models on copyrighted works constitutes “fair use.” In a resignation statement shared on X, Ed Newton-Rex cited the company’s 23-page submission to the U.S. copyright office’s public inquiry about copyright and AI. “Companies worth billions of dollars are, without permission, training generative AI models on creators’ works, which are then being used to create new content that in many cases can compete with the original works,” he said. “I don’t see how this can be acceptable in a society that has set up the economics of the creative arts such that creators rely on copyright.”
Cruise cofounders resign following permit suspension and recall of the company’s autonomous vehicles. CEO Kyle Vogt stepped down first, with chief product officer Dan Kan following suit the next day. The cofounders launched the company in 2013 and have led it together since, including through the $1 billion acquisition by General Motors in 2016.
Meta disbands its responsible AI (RAI) team focused on understanding and preventing harms associated with AI technologies. That’s according to The Information. RAI employees will be split up among the company’s generative AI product team and its AI infrastructure team. The changes are part of a larger reshuffle of AI teams and comes as the company increasingly turns its focus to generative AI.
YouTube’s new AI policies open its doors to deepfakes. The Google-owned company announced it will require labels on synthetic media but did not put forth any limitations on the uploading of AI-created content to the platform. Tech newsletter Platformer predicted a surge in deepfakes. It’s not clear exactly how YouTube will enforce the labeling, since all onus is placed on the uploader. Additionally, it announced a form users who are the subjects of synthetic videos can use to request their removal, thus placing responsibility of removing potentially harmful impersonations on affected users as well.
A win for drug discovery. Proteins found in nature represent only a small fraction of all possible proteins. That’s a fact most people probably never come close to even thinking about, but that’s been driving Massachusetts-based biotech Generate:Biomedicines since its inception.
This past week, the company announced through a paper published in Nature that it created a generative AI model capable of creating novel proteins not previously found in nature with targeted biophysical, biological, and therapeutic properties. Called Chroma, the model can essentially create proteins from scratch in response to the researchers’ requests for specific features, opening up new methods for research that could drastically speed up and simplify the creation of much-needed medicines.
“It is exciting to imagine the potential of such a capability, that is being able to request desired protein features and properties directly through natural language prompts.,” the authors wrote in the paper.
Chroma uses diffusion models, the same type of model used in DALL-E 3, Midjourney, Stable Diffusion, and similar tools. Along with its breakthrough, Generate:Biomedicines announced it’s open-sourcing the model—making both the code and model weights used to train the neural network publicly available—in order to accelerate collective action in generative biology. You can read the paper here, and GEN has a great deep dive for less technical readers.
OpenAI’s new CEO once labeled himself ‘super opinionated’—and likened working for Microsoft to selling his soul —Chloe Taylor
Microsoft CEO Satya Nadella’s response to the OpenAI board debacle is a masterclass on taking fast, decisive action —Lila Maclellan
OpenAI’s venture capital investors keeping legal action on the table if Sam Altman isn’t reinstated, sources say —Jessica Mathews
AI and TikTok are shaking up the news industry —David Meyer
Altimeter CEO Brad Gerstner says AI will cause ‘the largest displacement of human labor in the history of capitalism’ —Steve Mollman
Brian Chesky: Airbnb’s ‘holy grail’ is to become an AI travel agent —Michal Lev-Ram
Building AI models is an ‘enormous waste of social resources,’ says Baidu CEO one month after his company released its latest AI model —Paolo Confino
The who’s who of AI. Speaking of AI leaders, Fortune today published the inaugural Fortune 50 AI Innovators list. From groundbreaking startups to the tech giants who are spending billions to dominate AI, the list explores the companies shaping the AI ecosystem and thus our world.
With the AI landscape now truly up in the air, there’s no better time to get familiar with the competition. You can check out the Fortune 50 AI Innovators here.
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