Closing Bell - CNBC SPECIAL REPORT 11/20/23

Episode Date: November 21, 2023

We take you inside the dramatic AI arms race as Microsoft hires ousted OpenAI CEO Sam Altman.  Jon Fortt recently spoke with Microsoft CEO Satya Nadella about the company's AI future. Plus, a panel of experts weigh in on what Altman's hire means for the software giant. 

Tonight, on a CNBC special report, Microsoft CEO on the record. Sam Altman once chose Microsoft, and he chose Microsoft again. His first comments following the shocking headlines rocking the AI world. We have major breaking news related to OpenAI. Sam Altman is out as CEO of OpenAI. Breaking news overnight after being fired from OpenAI. Microsoft CEO Satya Nadella announcing Altman will join Microsoft as the head of a new AI research division. Tonight, we take you inside the AI arms race with one of tech's biggest power players.

This CNBC special report, Satya Nadella and the future of AI, starts right now. Welcome, everybody. I'm John Ford, and we are coming to you live tonight following a dramatic 72 hours in the world of business. It all started Friday, a boardroom coup that shocked the tech world, reminiscent of Steve Jobs' ejection from Apple 38 years ago. OpenAI CEO Sam Altman, face of the startup that brought the world chat GPT and launched the artificial intelligence revolution, was getting the boot. Or was he? Customers and partners pushed back. OpenAI's board gave little explanation for the firing.

And by Monday morning, OpenAI's leadership and employees erupted in full revolt against the board, insisting that either Sam Altman return or the majority of them would leave en masse and join Altman at Microsoft? Yes, Microsoft. CEO Satya Nadella both engineered Microsoft's multi-billion dollar investment and relationship with OpenAI and became Altman's refuge of choice when the board ousted him. And here we are roughly 10 years into Satya Nadella's successful turnaround of Microsoft, and we're witnessing a rare public chess match from a CEO who needs to win at AI to secure Microsoft's next 10 years. It's unclear how this will turn out, whether Altman will go back to OpenAI or join Nadella at Microsoft. What is clear is that in the midst of boardroom chaos in tech,

Nadella has so far managed to control the center. Here's Nadella with me on CNBC this evening. On Friday morning, John, I got up and I was very committed to our, you know, customers and confident in our technology roadmap and really partnered with OpenAI and really partnered with SAM. And here, as we speak on Monday, I guess it is today, it's exactly the same place I am, which is I feel that we have all the technology and capability to keep innovating on the products you saw at our Ignite conference last week, up and down the stack from silicon to co-pilots, and committed to OpenAI and SAM. And that's, you know, irrespective of what

configuration, you know, obviously, we want SAM and Greg to have a fantastic home if they're not going to be in OpenAI and all the colleagues at Microsoft. But, you know, I am exactly where I was on Friday morning. Well, you're about the only one. So let me maybe ask it this way. How clear is it to you whether Sam is going back to OpenAI and whether the 700 employees there who seem to be loyal to him are staying at OpenAI or coming to Microsoft? Look, I mean, that is for, you know, OpenAI board and management and

the employees to choose. I think at this point, for me, I just want, John, in this moment, right, what is it that I care about? I care about just making sure that we can continue to innovate. And as I said, I feel very, very confident. Quite frankly, Microsoft has all the capability to just do that on our own. But we chose to explicitly partner with OpenAI, and we want to continue to do so. And obviously, that depends on the people of OpenAI and staying there or coming to Microsoft. So I'm open to both options. But one thing I will not do is stop innovating. And so, therefore, that's kind of what I will optimize on into making sure that we keep going forward on the roadmap we talked about and there was

so much excitement around. Okay. Customers seem to want confidence. I'm sure Microsoft employees do, too. What needs to happen for OpenAI to be stable enough for you and Microsoft's customers to trust it. Can members of the current board stay? Does Microsoft need a seat on the board? Yeah, I mean, I think at this point, I think it's very, very clear that something has to change around the governance and if that's sort of, you know, and we'll have a good dialogue with their board on that and we'll walk through that as time evolves.

But the most important thing for me, for customers to know is today we have all the capability and this is where I know we love to talk about, you know, here's a way to think the thought experiment. Sam Altman once chose Microsoft and he chose Microsoft again. Why do you think that is? It is because of the capability of our company to be able to innovate with open AI. And so that should speak volumes to why customers can have confidence that come what may, Microsoft will be there, will continue to have the

products and lead in AI. That's, I think, the core message for our customers. Okay, well, one of the things we know is coming is competition. Next week, AWS is going to have reInvent. I suspect they're going to say, hey, look, we're stable. You can trust us to have all our employees who are working on AI still here. You've already got Mark Benioff, CEO of Salesforce, trying to hire away OpenAI employees in this turmoil. So how long do you have to get this kind of stabilization that at least your competitors seem to think has you in a vulnerable position? I think there are these charts that float around

and if you think about the AI papers, AI innovations, AI researchers, AI people, I think people should just go refresh their memories on what that capability chart looks like. If you're not number one or number two, I would be surprised. And that should speak volumes. And, you know, look, we welcome competition. And these are all credible competitors. But, you know, it's not like we just learned about AI

because of OpenAI. We had a lot of OpenAI capability before with OpenAI and after, even at Ignite. Think about this. With OpenAI, we have the leading LLM or the large model, and we have the leading small model with FI, which we announced the 2.0. So it just speaks to, I think, the breadth.

And, by the way, we have all the 2.0. So it just speaks to, I think, the breadth. And by the way, we have all the open source models on Azure as well, from Mistral to Lama, and we love it. And we have the best tooling, the best data architecture around AI, and then the best products with Copilot and GitHub Copilot. So I don't feel that, you know, if anything, we are much more resolute in our sort of roadmap and pushing forward on the innovation. And I feel like, hey, look, there's a lot of talk. There are very few people with real products, at scale, innovating on behalf of our customers. You mentioned governance before.

It seems to me that it's likely that you come out of this situation as Microsoft with more leverage in the open eye AI relationship one way or another than you had Friday morning. OK, because your relationship with Sam Altman remains close. And it seems like Sam is either going back there with more control or coming to Microsoft. And that gives you an amount of leverage. Am I reading that wrong? Yeah, look, John, I don't think of this as leverage. I mean, the reality, I think, is the world is recognizing how deeply partnered we were

with OpenAI and SAM and all of the dependency OpenAI has on Microsoft to do our world-class work around it, right? We do the kernel optimizations underneath. We do the infrastructure. We build tools around it. We build products around it. So, I feel like, hey, look, we had a fantastic partnership on Friday, and we have a fantastic partnership today. And if things change in the OpenAI side in terms of who is there or who is not there, as I said, we will have a fantastic home for the people who want to continue to do the same work with the same mission at Microsoft. Well, Satya, I'm not sure what this initial rift between Sam and the board was about. Maybe you

know better than I do. Feel free to tell us and the viewers if you want to expound on that. But either way, it seems like there is a segment of people who were concerned about the development of AI being driven by profit. And that's the reason why OpenAI and its board were structured the way they were to begin with. If the governance changes and Microsoft continues to have this relationship, what assurance can you give people

who are concerned about this that the development of AI won't purely be driven by profit? Yeah, I mean, look, I think about this. This is an interesting question, John. I've always sort of subscribed to, you know, that, you know, the idea that the social contract of a corporation is to drive profitable solutions to the challenges of people and planet. And so, to what I think about the license to operate for Microsoft, yes, of course we have to generate profit, but at the end of the day we have to create solutions that are useful and are real solutions to challenges of people and planet.

So this is not about profit for profit's sake, but it's about driving profit by doing work that the society needs. That's how I think we have a license to operate in every community and country that we operate in. And so that's what we will continue to pursue. And then, of course, the OpenAI, it's a different structure. It's a nonprofit. And we respect that. The other thing that they really care about is safety. That was very clear even the day when Sam and I got together originally with the OpenAI partnership. We care about it. When we talk about trust in technology, we want to make sure that we are dealing with not only the benefits of technology, but the unintended consequences of the technology from day one, as opposed

to waiting for things to happen. And so that's some AI safety research for the long term. And even here and now, guardrails, whether it's on bias or disinformation or what have you, is something that we are putting a lot of energy into and we'll continue to do so. With me here, CNBC's technology correspondent, Steve Kovach, has been covering this story from the moment it broke. Literally. It's a remarkable show of strength from Microsoft that Altman and OpenAI seem to want to be there as an option. In some

capacity. And a big potential vulnerability. Yeah. How's the tech world weighing it? Yeah, this, I mean, it looks like it's going to game out one of two ways. I mean, to give you an example of how much of a roller coaster this has been since Friday night when this did, three in the morning, we all wake up to a tweet from Satya Nadella. Sam Altman is a Microsoft employee. 15, 16 hours later, he's on CNBC with you saying, I don't know where he's going to be. Maybe, you know, but what he, what is true out of that interview, and my big takeaway is it's a, for Microsoft, it's a heads I win, tails we lose situation dealing with this opening I board. One scenario, they bring in Sam

Altman. Sam Altman is a Microsoft employee, and he attracts those hundreds of employees who have all but said, we're going to follow him wherever he goes, whether that's Microsoft, staying at OpenAI, or maybe to some other place. If they can land this plan and bring Altman back, and then nothing happens, we're in a time machine. We're back on Thursday already. Nothing happened. But what does all of this mean, really? I think for a lot of people, we're starting in the middle. Why were they mad at Sam Altman in the first place? It seems like here's a company that was set up to protect the future of AI and make sure it didn't destroy humanity, right? And that some profit-hungry company didn't take this too far. Which is a great mission, by the way. It's

a great mission. Over the past year, we've seen AI get very expensive to develop, seen open AI get very valuable, and we've seen Sam Altman coming up with all of these ideas to profitably grow. And so it seems like this is a moment where its potential value is running headlong into the values that it espoused at the beginning. And to be fair, we don't know what the board is thinking. The lack of clarity from the board is outstanding. And I mean, even Nadella, he was on with you. He did some other interviews today and just would not say what was the thing that caused the board to, in such a dramatic way, oust their CEO, this well-loved CEO,

not tell their investors, not tell their most important investors at the very last second, do it before markets could even close on Friday, send Microsoft's stock down. You only do that when something is incredibly wrong. So, I mean, more than anything, it's a story of poor board management and also this just funky structure they have as a non-profit. And look, the other takeaway here is, and I think the most solid thing out of that interview is, no matter what happens, it sounds like Microsoft is going to agitate for some restructuring of that board governance, whatever that looks like, whether that means Nadella's sitting on the board with Sam Altman or some kind of mix in between. I feel like this model has already proven it's a failure. Well, let's talk more about that. Steve, stick around. Let's bring in Nilay Patel from The Verge. She's also been reporting on and leading coverage of this story.

Nilay, when's the last time we had a leadership coup struggle story this wild? I've been trying to think about it all weekend. Uber, maybe it was Uber, but Uber had a real board of directors that could be forced to do things by the other board members. Whereas here, you appear to just have three people that no one has any leverage over who are just unmovable that Sam Altman should not be the CEO of OpenAI. And yet they've been moved. I can't think of anything like that ever. I mean, haven't they been moved? Didn the employees move them essentially because they want Sam Altman back? It seems like, I mean, we had the person who many people thought sparked this whole thing, getting on X, apologizing for it midday, saying I never meant to harm the company.

I mean, it doesn't look like this board is going to be in much control for much longer. They might be in control. They might just be in control of nothing. I think that's the truly strange part. And I think everyone has assumed over and over again that this thing is over. Right? Last night when Microsoft is tweeting that Sam is going to join the company, there is a pretty big assumption that this thing had run its course and that Sam would join the company, bring it over and over. Microsoft stock price hit record

highs on that news. And it was still definitely not over. The 700 people have not yet left. They've not yet gone to Microsoft. Sam Altman has not yet publicly said he's going to Microsoft. He's apparently told some people inside Microsoft that he will join, but he's not in the employee directory yet. The paperwork isn't done. I don't know what happens next. I just know that unless the three remaining board members who are opposed to Sam returning resign, and that's their replacements, and Microsoft gets whatever it wants in terms of governance structure change, OpenAI might not exist anymore. And I think that is essentially what you're seeing is the pressure campaign to make that outcome more and more real is building by the day. What Microsoft accomplished last night was just stabilizing the market for a day or two

to let that pressure campaign continue. Steve, it might be better for Microsoft if Sam Altman doesn't come to Microsoft, does in fact go back to open AI just with more power because... And a better board governance too, or more amenable board governance. Yeah, better is better and subjective at this point. But if Altman comes to Microsoft and all those employees come to Microsoft, then all of a sudden you've got this super valuable startup that's not worth so much anymore and a bunch of investors holding the bag who might sue. And not might. It sounds like that's exactly where it's going.

I mean, there was this report out. Josh Kushner was tweeting just minutes ago before we went on air saying, basically, yeah, we're going to sue, but support the employees through this lawsuit. I don't know how that works. It sounds like he's actually protecting their investment. But yeah, that sounds like where it's going. Microsoft, again, like we keep talking about,

had so much leverage because of its position, because of its use of technology, also owning the stack that all this stuff is running on. OpenAI needs Microsoft big time, probably more than Microsoft needs OpenAI, or at least that's the message they're giving. Who knows? I mean, it's so unclear where this is going to go moving forward. What does development look like? And I guess the big question is also, how does this impact Microsoft's product roadmap? Let's say this is all settled by the end of the week, and Sam Altman is back.

We're back to the status quo, except with different governance. Is it really back to where it was? Are they really able to develop products as quickly as they wanted to? Or do they lose that mission? Or do they become like a move fast and break things type company?

That's going to be really interesting without that board kind of breathing down their necks, if that is in fact where it goes. But it's really going to be, it sounds like it's up to the employees or the board listening to the employees or not. Like you said, it's like these strikes that we've been seeing from Starbucks and UPS and so forth, just in a very geeky engineer way. And Eli, there's also the question now of does this open up opportunities for Microsoft's competitors? AWS, Amazon has a big developer conference next week. Google stock has been a lot higher, Alphabet this year, on its argument that, hey, it's not behind in AI. It can rally. Does this offer an opportunity for those companies to say,

see, things can change quickly. You don't want to be all in with just one provider. Come give our stack a try. Yeah, I do think it opens up some opportunities. I also think there's an opportunity for NVIDIA, which has been trying to distribute its GPUs more broadly about different kinds of AI providers and really bring people into a software mode. My read from inside Google today, just as I've been asking around, is they are in wait-and-see mode, like Google almost always is. They think it's a mess. They're looking at a mess and saying, it's hard to be opportunistic when we don't know the shape of the mess. I think Amazon is a little bit more

aggressive. They're a little bit more opportunistic. Azure is the moat for Microsoft. What Microsoft has been saying pretty loudly this whole time is, what people want is our compute. What people want is our data centers. Our infrastructure build-out is huge. Nadella said to you, look, we've got all the models, including the open-source models,

including Lama from Meta. That moat is pretty real. Whether or not you want to build on top of OpenAI's models, OpenAI's APIs, is a different question than what I think Microsoft has long considered its business to be, which is providing services to developers across all the models. Neil, one more thing. Just to talk about that here. I've got to get to Elon Musk, who is a founder of OpenAI. But first, today, he sued Media Matters because of what's gone on with X.

What have you been working on, your team been working on when it comes to that story? Why is that significant? Look, I think the advertiser exodus from X is a huge deal. You can't run around suing the advertisers for leaving so you self-proclaimed champion of free speech free speech absolutist you go punish a media watchdog organization for something that you admit is true right they did the report they twitter has not denied that media matters saw saw the ads next to the bad content. They're denying that anyone else might ever see the ads next to the bad content.

That is a ridiculous lawsuit for a free speech absolutist. What you should be trying to do is improve your product such that the world's biggest advertisers want to come back to you. What you should be trying to do is shutting up and not replying to racists and anti-semites on your platform. That's why the money's leaving. It's not media matters. It's Elon Musk, his actions, his words, and his attitude have emboldened racists on his platform. You can't sue your way out of that problem. And you certainly should not be asking Ken Paxton at Texas to use the power of the state to punish speech.

That is completely inappropriate. I'm a journalist. I'm speaking on a journalistic network. I feel very comfortable saying that is a crass overreach from the state over the First Amendment. And everyone on every side of the aisle should look at state government speech regulations, state punishment of speech and say that's wrong. All right. All right. I mentioned that because Elon Musk, one of those power players in this situation, who at one point helped start OpenAI and had some thoughts about how that should go. Everybody's connected at this

point. Neil, I appreciate it. Steve Kovach, thanks for being here. And we are just getting started on the CNBC special report. Up next, does OpenAI's turmoil create a lane for the competition in the AI arms race? We're going to look at the companies you and others should be watching, whether it's time to buy the chips, what it all means for tech names like Amazon, Alphabet, big show still ahead. Don't go away. We welcome competition, and these are all credible competitors. But, you know, it's not like we just learned about AI because of OpenAI. We had a lot of OpenAI capability before with OpenAI.

And if anything, we are much more resolute in our sort of roadmap and pushing forward on the innovation. That was Microsoft Chairman and CEO Satya Nadella talking competition in the AI space with me earlier this evening and how his company's position in the crowded field of other giants, including Amazon and Alphabet, Deidre Bosa has more on where things stand now, who might be winning. Dee? Bottom line right now, nobody knows who's going to win. We know less than we did on Friday, you could argue. Microsoft does seem like the early winner, but this is still very much playing out as you guys have been talking about. Now,

the bull case is that Microsoft already has the OpenAI IP and now could get the talent to exploit it. Some are making the case that Microsoft essentially acquired OpenAI for $0, completely bypassing antitrust review too, by the way. The bear case, though, is worth mentioning. It's that even if Nadella gets Sam Altman and others to come over to Microsoft, they come with reputational and execution risk. More of the hallucinating, ugly side of chat GPT, that could fall on Microsoft. And there's also the chance that Altman and others don't stay at Microsoft. The OpenAI charter, for all of its flaws and altruistic or virtue signaling, it was aligned with Silicon Valley mentality.

Change the world, change humanity for the better. Co-pilot and Office 365, a little less so. As for the other mega caps in the AI arms race, Google, Meta, Amazon, they could certainly capitalize on this uncertainty. And indeed, the scramble for talent is already underway. You've already seen Salesforce CEO Mark Benioff make his pitch on X or Twitter. This is happening in private as well. One AI startup founder put it to me this morning, if you aren't reaching out, you have a bad AI team

in the first place. Now the other players will also scramble for customers. OpenAI has cited that it has more than 90% of Fortune 500 companies using its services. Wells Fargo in a note today says to expect Amazon, Google, and Meta to make the case that at the very least, secondary providers should be considered when building increasingly mission-critical AI applications. John, finally, the NVIDIA of it all. That could be interesting, too. On one hand, if Open AI and Sam Altman goes to Nadella, more compute power that requires its GPUs. On the other hand, though, Altman could have a very well-capitalized benefactor

to develop hardware, whether that's within Microsoft or a deeper partnership with Microsoft, as the reports say that he might be looking to do. All right, Dee, good use of on the other hand. Thank you. All that competition gives enterprise AI customers plenty of options during this shakeup at OpenAI. Joining us now, 4Thought CEO and co-founder Dion Nicholas. He's one of those customers. 4Thought develops chatbots and other customer support tools that use generative AI. Dion, thanks for coming on. So does this change the calculus for you on how much you rely on OpenAI? Thanks for having me, John. Excited to be here.

Well, in many ways at Forethought, we've always been thinking about the security and stability for our customers. That means leveraging the latest and greatest architecture, both from OpenAI and our own infrastructure. But I think the news of the last week has definitely forced us to kind of think further about how we're diversifying our models, right?

We already leverage models internally. We leverage OpenAI. We also leverage models on AWS and others. And so as we're seeing this happen, we're starting to look into other models. For example, can Azure, GPT on Azure support the same load that the GPT from OpenAI could support and other models like that. So is this kind of the beginning of a push for hybrid AI, just like we have this push for hybrid cloud and multi-cloud, where you have a lot of different options of what you can pivot to in case, yeah, sure, maybe there's a technical issue, but even if there's a governance

or just sort of operational issue with the platform you use? I think so. I think that's actually ultimately a good thing for consumers, for AI builders like us here at Forethought, and for everyone involved, right? So it's not great to just rely on a single provider when it comes to your models. And so you now have GPT, you have Claude from Anthropic, you have all of these different models that are actually racing to quote unquote be the best. And that should actually translate into benefits to the customers. And under the hood, folks like us here at Forethought and other vendors should be handling

all of that complexity to make sure that we're switching models, so to speak, under the hood so that our customers get the best value. And just take a step back with me, what this year in AI has meant for Forethought. I think you guys are at Series C right now. You've raised quite a bit of money. How has the conversation shifted for you as OpenAI and NVIDIA in particular have brought this conversation mainstream? Yeah, so AI has always been in our DNA. We launched five years ago at TechCrunch Disrupt with this vision of using AI for customer service and beyond.

But what's really different is that in the past, we had to bang on people's doors to explain to them why they need AI. And I think the last year has been a complete flip of the script, where people are now banging on our doors and other providers to tell us why they need AI. It's now a board-level priority to get this stuff right. Many companies are weighing whether they should be building this stuff themselves, leveraging providers such as OpenAI or others, or using third-party vendors who are experts at the security, at the stability, and at the specific applications like customer service, like Forethought and like

others. Well, we can see next year is going to be very different one way or the other. Dion Nicholas, Forethought CEO. Thanks for joining us here on CNBC. Still to come, more on the AI boardroom drama that sent shockwaves through the tech world and how Microsoft CEO Satya Nadella seemingly pulled off a major power play. Stick with us. We're back in a moment. Welcome back to our special report. During the uncertainty of this weekend, investors and analysts were focused on how Microsoft CEO Satya Nadella would respond to the bombshell news of Sam Altman's ouster. It appeared Altman was heading to Microsoft.

In my interview with Nadella earlier tonight, it really remains unclear exactly how this is going to shake out. What is clear is OpenAI's management is in crisis. This could become a defining moment in Nadella's tenure. Joining us now is Jeffrey Sonnenfeld. He is Senior Associate Dean for Leadership Studies at Yale School of Management. He's also a CNBC contributor. Jeffrey, it's good to see you. So normally startup founders and CEOs, startup employees are running away from big companies. OpenAI is arguably the hottest startup in Silicon Valley. Sam Altman's plan B appears to have been to run to Satya Nadella and become a Microsoft employee 20 years ago. Who would have thunk it? It's really unbelievable. I'm so glad

you got an hour-long show to talk this through. There are just so many different stones to turn over here, but congratulations to you. I should get your autograph so many different stones to turn over here. But congratulations to you. I should get your autograph as you've got to be one of the hottest people in the business, too. How did you possibly get Satya Nadella's interview tonight of all nights? But he is obviously quite the magician in the technology world. But Sam Altman, very few of us even knew who he was a year ago. Some of your viewers knew it, but honestly, most of them would say they didn't know until this thing broke on the scene. But here he is, the one guy who could span the true believers, the profiteers, the curious creators, the alarmists, the pragmatists, all the different AI camps. He's able to bridge them externally and internally, has this extraordinary trust. I mean, I remember when

Steve Jobs was forced out. I remember when Travis Kalanick was forced out. I worked with the board of HP through Mark Hurd's exit. And those technology exits, even the loyalty that folks had to Steve Jobs, you didn't see the whole company walk out over him. This is now over 700 of the 720 employees. I don't know who's left in there. Well, the Steve Jobs ouster happened, what, 38 years ago, before the era of social media. News spreads fast within a company. People organize quickly. People have compared this Altman moment to the Steve Jobs moment. In that Steve Jobs moment, there was no huge company that came in that he could sort of run to. He sort of walked the earth, started Pixar, you know, ended up starting Next,

which got acquired by Apple and let him back. What's the significance of Satya Nadella's role in this classic, you know, struggle for the future of a startup and technology. Well, there are two sagas here. And unfortunately, we need a couple more hours to talk about each because the Sam Alton saga is amazing. It's unparalleled for a lot of the reasons you just said. But the Satya Nadella story is also breathtaking. A year ago, we gave him our Legend of Leadership Award exactly a year ago for our Yale Institute. And also, I wrote a piece in Fortune saying he was the Outstanding CEO of the Year.

His stock at that point was up 1,000% from when he stopped in in 2014. Who would have thought how prescient I guess I was? No, just lucky that he's up now 2,000% since he stepped in. All these acquisitions which work from Activision to Nuance to others that people doubted, some 50 of them. But as he's built it out very successfully in the cloud platform and integrating innovations, investing a lot internally too, $25 billion or more in innovation internally, but to make these kind of acquisitions that he had a base to turn to so that there's a home for somebody like Sam

Altman. And Satya Nadeau can't lose. He was more nimble than any of his competitors. Google, of course, would love to have had him. Mark Benioff, I'm impressed, was trying to lure him. Amazon. But most of the rest, you know, Elon Musk is the big loser here, of course, as of his own temper tantrums with Sam Altman years ago. Jeff, all great points, and you've outlined the tactical success of Satya Nadella. But what gets me here is the trust, right? The trust that he has with individuals that he's partnered with that led to him being this partner, this option. We don't always see that. No. And if he were watching, he would hate me for saying the following,

but he's perfect proof for these people that are championing these anti-woke positions. He has also always proved that doing good is not antithetical to doing well. Sure, he looks at carbon negative and zero waste and all the rest and water positive, but that's not at the expense of doing well for the shareholders and being on the frontiers of technology. But technology you can trust, that's really remarkable.

And that everybody knows that they can trust his word. It's what he's done sort of culturally, perhaps rivals what he's done technologically, building this culture of innovation. It's the kind of place where all these 700 people would want to go without hesitation should the board be dismissed as they should be. This is the worst board governance model we've ever seen, except for some of the corrupt ones 20 years ago. Well, say more about that. Say more about that, Jeff, because this board seems to have wanted from the beginning to do something different, right? To not be about just chasing

profit, to not be accountable to its financial investors, but to be accountable to the world, not taking this AI thing too far. And I'm sure they would argue that that's why they did what they did, even if it didn't work out. Is that wrong? It's wrong. What you said is not wrong. What they did is wrong. And you're always right, John. But what's wrong about what they did is sure that maybe it was some nobility. There's a virtue that they had. There are other places, believe it or not, that have a structure like this. Underwriters Lab, UL, the big testing place on stability of technologies and appliances and things like that, has a nonprofit parent company that oversees a for-profit subsidiary.

It's not unheard of. But what's unheard of is to have a board that makes such impulsive decisions, catching everybody surprised, including their largest investor, 49% stake, Microsoft, leaving others like Sequoia and others confused, the other 51%, which certainly are wondering. Every other constituency, the employees, the suppliers, the partners, wondering what in the world is going on here. And no explanation, because in fact, it seems to have just been a temper tantrum, a power struggle. So that's what's wrong, is their process, their conduct. If they had a dispute, you work a dispute out. You just don't

go into a temper tantrum like this and not knowing what the consequences are going to be. Talk about, you know, being caught unprepared. They certainly didn't understand that the whole company was going to walk out on them. A company that's worth $86 billion. Or at least they thought it was. Yeah, yeah. Jeffrey Seidenfeld, thanks so much, Jeff, for joining us tonight. Thank you. Up next, breaking headlines just crossing from the information saying OpenAI,

the board approached smaller rival Anthropic about a merger in the wake of its ouster of Sam Altman. The information's Jessica Lesson is going to join us with this fast-developing story next. Welcome back to the CNBC Special Report. We are following developing headlines crossing just now on OpenAI. The Information reporting that OpenAI's board approached smaller artificial intelligence firm Anthropic about a merger. And this was after the board ousted Sam Altman and was looking for a new CEO. Let's bring in Jessica Lesson, CEO of The Information. Jessica, this is interesting to me because the founders of Anthropic used to be at OpenAI

and felt that OpenAI was getting too commercial. So is this essentially the cause of the rift, OpenAI's board trying to pull it back in the direction of Anthropic? You know, I think, John, this was OpenAI's board scrambling, which is still what it's doing now to try and resolve the situation. But over the weekend, the board realized it needed a new CEO. And so it approached a lot of people. We've reported several, including the former head of GitHub and many others, and then including Dario, who runs Anthropic. So this would have been the plan to bring him over and merge the two. But like so many other things the Open AI board has tried in recent days, it has failed

and they're still scrambling. So it seems the employees are the key constituency here because if they leave, there's no company left. But if they're willing to leave rather than hew to whatever kind of value statement the board is trying to make, does that mean it's the end of non-commercial AI startup? Did this experiment fail? You know, John, we need to know why the board took the action it did in ousting Sam Allman. And we have a sense that there was this ideological battle between sort of safety and commercialization. But, you know, my reporting and other things suggest it's more complicated than that. And so I think we need to know that to answer your question. Regardless, however this shakes out, we are going to see, I think, Microsoft get more powerful. We're going

to see the big companies that are really pushing the business side of AI be more powerful. And I think that's going to have a lot of people concerned about the future direction of the technology. I know you and your team at The Information are going to continue to dig as you always do. Jessica Lesson, thanks for joining. Still ahead, how to position your portfolio for the AI revolution. One money manager breaks out her playbook with some under-the-radar names to consider. The CNBC Special Report is back right after this. Sam Altman once chose Microsoft, and he chose Microsoft again.

Why do you think that is? It is because of the capability of our company to be able to innovate with OpenAI. And so that should speak volumes to why customers can have confidence that come what may, Microsoft will be there, will continue to have the products and lead in AI. That's, I think, the core message for our customers. It's quite a pitch. That's Microsoft CEO Satya Nadella on why he's aiming to bring OpenAI's ousted CEO, Sam Altman, into the fold, whether he's a Microsoft employee or back leading OpenAI. Microsoft is up nearly 60%

on AI optimism this year, hitting all-time highs today. NVIDIA is up nearly 250% on those same kinds of hopes, also hitting new highs today with earnings out tomorrow. So how can investors capitalize now on all this momentum? Joining us is Halftime Report's Bryn Talkington. She's Managing Partner at Requisite Capital Management and a CNBC contributor. Bryn, welcome. So Sam Altman is choosing Microsoft. Should investors choose Microsoft at these all-time highs?

I think investors have been choosing Microsoft for years. You know, Microsoft is really one of two names that actually has remained in the top 10 of the S&P since 2000. And so I think that, you know, with Satya at the helm, I mean, the two best salesmen in the business are Satya Nadella and Jensen Wong, and they both have the goods to back it up. And so I think Microsoft, from an allocation, will continue to be a top holding, whether you

own an S&P type portfolio, a GARP type portfolio, or a growth portfolio. Because I think as we're thinking out over the next few years, if this is the beginning of the cloud, per se, that we had in 2012, they are definitely going to be in pole position along with NVIDIA in AI for years to come. But they're already seen as winners. One could argue, hey, I will, that Google and Amazon had very strong years this year because investors were doubting their AI prowess. The WCLD, that cloud index, is actually pretty depressed. So are there other smaller companies that are going to do well at AI that investors can bet on now and get more upside? I think you have to understand that, you know, most of the pure AI companies are the private

companies like the Lambdas, the Corweaves, the Anthropix, which most investors don't have access to. And so I think that if you look at, there's like three ETFs, I'm a big fan of the Qs, right? Because the Qs are going to give you actually 50% of names that are AI beneficiaries, but those are going to be the mega cap names. On the smaller names, there's two ETFs. Global X does a really good job. It's AIQ.

And then Wisdom Tree has one, WTAI, which are more equal weight. And although you'll own a Microsoft, it's only a 1% or 2% position. And you have smaller names like Global Foundries, ASML, Synapsys. And so I think you can do a barbell strategies if some of these ETFs are only owning smaller names with either individually owning Microsoft and NVIDIA. But preferably, I like the Qs because you're getting all of that exposure of those big names plus other names as well. All right, Bryn, it's a great setup for NVIDIA tomorrow. It's already been a winner.

We'll see if it can continue to win. Bryn Talkington, thank you. Well, now it's still unclear what the end game is going to be in this Open AI leadership saga. Will Sam Altman return with more power? Will he and the bulk of open AI's employees decamp to Microsoft? Can Microsoft's rivals use this moment of upheaval to make the case for their own AI platforms?

You've got Amazon with AWS reInvent just coming up next week. Google has its own argument and is making its own chips. Whatever happens, it's clear that leadership at these influential companies is being challenged like never before. Satya Nadella is playing an unusually influential role over the entire ecosystem here, OpenAI in particular, for a large company, the likes of which startup employees, startup founders used to run from. Fascinating to hear from him first on CNBC tonight, the one of these principals to speak up. Thanks for watching this CNBC special report. Continuing coverage throughout the night on CNBC.com slash pro. Shark Tank starts right now.