OpenAI shakeup has rocked Silicon Valley, leaving some techies concerned about future of AI

A wide swath of Silicon Valley has hitched its hopes and fortunes over the past few years to the kind of generative artificial intelligence technologies that OpenAI helped popularize.

Many industry experts point to the debut of ChatGPT late last year as an iPhone-like moment, ushering a potential shift in the way people interact with computers via written prompts that can produce creative, seemingly human-like text.

Just as Apple had the late Steve Jobs acting as the company’s esteemed figurehead, articulating the appeal of the iPhone and personal computers to the masses, so too did OpenAI have its own charismatic leader in Sam Altman.

With Altman out as CEO — at least for now — after his sudden firing on Friday, the Apple comparisons are flowing freely. Jobs was fired as CEO of Apple in 1985, a move that lives in Silicon Valley lore, since it was after his return in 1997 that Apple found the path that eventually made it the most valuable company in the U.S.

Altman, who previously ran startup accelerator Y Combinator, has spent the past year cozying up to world leaders and making routine 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 removed Greg Brockman from his role as chairman. Later Friday, Brockman said he was quitting the company.

“What happened at OpenAI today is a Board coup that we have not seen the likes of since 1985 when the then-Apple board pushed out Steve Jobs,” longtime startup investor Ron Conway said Friday evening in an X post. “It is shocking; it is irresponsible; and it does not do right by Sam & Greg or all the builders in OpenAI.”

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

Airbnb CEO Brian Chesky referred to Altman in an X post as “one of the best founders of his generation” who “has made an immense contribution to our industry.”

Matt Schlicht, the CEO of the startup Octane AI, told CNBC that Altman and Brockman, who was formerly the chief technology office of Stripe, “made a technology available that we’d only ever dreamed about” and called it “the most exciting and powerful development of our lifetime.”

Octane is one of many new startups using the so-called large language models that OpenAI packages under its GPT family of software tools. Schlicht said the technology has so far “enabled us to put human-level intelligence inside of our code, and because of that we have helped entrepreneurs generate over half a billion in revenue.”

“I’ve known both Sam and Greg for over a decade, they are incredible and inspiring leaders,” Schlicht said. “After hearing about their untimely departure I was immediately filled with sadness. Innovation in the world was suddenly halted.”

Ryan Jannsen, CEO of Zenlytic, shared Schlicht’s sentiment.

“The AI community is reeling,” Jannsen said, adding that technologists are confused about the circumstances related to Altman’s firing and what it means for OpenAI going forward.

“Sam and OpenAI were the catalyst that showed the world what AI tech is capable of,” Jannsen said. “A huge amount of the excitement and activity in AI today is very directly thanks to their pioneering work.”

Whether or not Altman returns, the turmoil at OpenAI could give rivals an advantage in what’s quickly become a highly competitive market for advanced LLMs. From heavily funded startups like Anthropic and Cohere to cloud computing giants Google and Amazon, companies will likely be “looking for the next best alternative,” given the perceived instability at OpenAI, said industry analyst Patrick Moorhead.

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

Josh Wolfe, a partner at venture firm Lux Capital, said OpenAI is taking a huge reputational hit at a time when companies are deciding what models they’re going to use as building blocks.

“There was a perception of steady, predictable, reliable reputable progress and engagement and communication with industry,” Wolfe said. “The surprise capriciousness of the move signals total unpredictability, which is terrible for companies making plans to work with or trust OpenAI.”

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

The post said that a “deliberative review process by the board” concluded that Altman “was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.” 

Silicon Valley’s high-profile startup CEO firings typically involve wrongdoing, rather than just philosophical differences about where the company is headed.

Several investors told CNBC that OpenAI’s hybrid model presented a red flag from the beginning, in part because incentives can too easily be misaligned. Now, they said, the company risks severe brain drain if top talent chooses to follow Altman to his next project or a competitor in the industry.

Altman, meanwhile, has the advantage of having made such a name for himself that he’d have no problem raising money for a new project from investors who view him as the next great tech luminary.

“Sam Altman is a hero of mine,” former Google CEO and investor Eric Schmidt said in an X post. “He built a company from nothing to $90 Billion in value, and changed our collective world forever. I can’t wait to see what he does next. I, and billions of people, will benefit from his future work- it’s going to be simply incredible.”

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

“I’m saddened by what’s transpired,” 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, whose CEO Satya Nadella was reportedly caught off guard by the shakeup, several venture capitalists were surprised that the company could be so unaware of what was brewing given the billions they’ve invested in the company.

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

Industry analyst Moorhead said Microsoft could “figure out how to buy this company and how to put Sam in charge.”

“That’s the first play, it’s potentially finding ways to remove the current board of directors, reinstall new board of directors and then bring Sam and company back in — making sure the band stays together,” Moorhead said.

Regardless of 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 not even a whiff of diminished promise,” Lipton said.

— CNBC’s Lora Kolodny contributed to this report

WATCH: OpenAI says Sam Altman exiting as CEO because ‘board no longer has confidence.’