Sam Altman’s Counter-Rebellion Leaves OpenAI Leadership Hanging in the Balance
AI startup’s ousted chief executive tries to negotiate his return
3 min
SAN FRANCISCO—Two days after Sam Altman was ousted from OpenAI, he was back at the company’s office, trying to negotiate his return.
The former chief executive officer entered with a guest badge on Sunday and posted on X: “first and last time i ever wear one of these.”
The leadership of the company that created the hit AI chatbot ChatGPT remained unclear Sunday, as investors and many employees pushed over the weekend to restore Altman. He has been engineering a countercoup to retake control of one of Silicon Valley’s most valuable and high-profile startups.
The abrupt shake-up at OpenAI turns on one of the oldest tales in Silicon Valley: a breakup between a founder and his board.
But in this case it was a very particular kind of founder—the face of Silicon Valley’s artificial-intelligence revolution—and a very particular kind of board, which was tasked with making social good a priority over profit. The rupture threatens the future of the company and the billions of dollars investors had put into it.
Altman has also been considering starting his own venture, potentially with talent from OpenAI. He is pursuing both tracks: On Sunday morning, Chief Technology Officer and interim CEO Mira Murati sent a note to staff saying Altman would be returning to the San Francisco office later that day as discussions to reinstate him continued.
Over the weekend, Altman made clear to his allies that if he does return, he wants a new board and governance structure, people familiar with the matter said.
Two days after the board fired Altman, different explanations persisted for the initial firing. The board said Friday it pushed out the CEO after it concluded he hadn’t been candid with the company’s directors. It didn’t elaborate.
Over the weekend, people close to Altman said the ouster had more to do with disputes around the safety of the company’s artificial-intelligence efforts and a power struggle with one co-founder and board member in particular, Ilya Sutskever.
On Sunday, a person familiar with the board stood by the board’s statement citing Altman’s lack of candor. This person said there was no single precipitating incident but rather a mounting loss of trust over communications with Altman that led it to remove him as CEO. The person declined to offer examples.
The ouster from OpenAI wasn’t the first time Altman was asked to leave a company. Several years ago, senior leaders at the venture firm Y Combinator asked Altman to step down as president after mounting concerns about the time he was spending on his other business endeavours, including at OpenAI, according to investors briefed by the venture firm’s executives—information not previously reported.
In addition to OpenAI, Altman recently hatched plans for two new business endeavours. He enlisted Apple’s former chief design officer, Jony Ive, to create a consumer hardware device. And he recently spent weeks in the Middle East gauging investor interest for a new startup aiming to create low-cost chips needed to train OpenAI’s artificial-intelligence models, people familiar with the matter said.
It is unclear whether those efforts, or the communication around it, played into Altman’s dismissal. Bloomberg earlier reported on the new chips venture. The Information and the Financial Times earlier reported the new Ive venture.
With his firing from OpenAI, Altman quickly got the upper hand in terms of public messaging. The board didn’t use a communications or law firm in its dealings, people familiar with the board said, expecting that the OpenAI team would help them. But Altman had loyalty from investors and employees.
The board ended up isolated as social media exploded with shock and support for Altman. His largest backers, including Microsoft and Thrive Capital, immediately on Friday began pressing for Altman’s position to be restored. Microsoft CEO Satya Nadella began working with Altman that evening on his next steps, people familiar with Altman said.
Despite his business success, Altman had been losing the support of a board whose constituents changed as the company’s commercial efforts powered ahead. It was a board structure that he had ironically helped create and publicly promoted as he encountered questions about AI safety.
Before Friday’s dust-up, the board consisted of six people, including Altman. Then, it abruptly removed Greg Brockman, OpenAI’s president and a close friend of Altman’s, and voted to oust Altman. None of the four board members remaining were affiliated with the company’s big investors. It isn’t clear whether the vote was unanimous.
The board that took the action was down from the nine seats it had earlier in the year and lacked at least one key prior Altman backer. Earlier this year, Reid Hoffman, a Silicon Valley venture capitalist with a long history of supporting Altman, stepped down after starting a rival company to OpenAI.
Separately, Shivon Zilis, a tech executive at Elon Musk’s brain-implant startup Neuralink, and Will Hurd, who started a presidential campaign, also left this year.
The board had been working to fill those empty seats for months, though the process stalled, according to a person familiar with the matter.
The other four directors are: Adam D’Angelo, a former Facebook executive and the founder of the question-and-answer website Quora; Tasha McCauley, an adjunct senior management scientist at Rand; Helen Toner, a director at a Washington nonprofit; and OpenAI’s chief scientist, Sutskever.
Altman this weekend was furious with himself for not having ensured the board stayed loyal to him and regretted not spending more time managing its various factions, people familiar with his thinking said.
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Mirzaian is a senior director within CBRE’s Development NSW business, operating across the company’s Western Sydney and North Sydney offices
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Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.
3 min
Wall Street’s hottest trade has gone ice cold.
For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.
The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.
Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.
“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.
Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.
Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.
Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.
“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.
Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.
“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”
Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.
Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”
The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.
The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.
These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.
Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.
The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.
Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.
Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.
And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.
“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”
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