Microsoft shares dip as WSJ reports SEC probe of Sam Altman

MSFT stock lower on report of SEC probe into OpenAI CEO Sam Altman 

The U.S. Securities and Exchange Commission (SEC) is conducting an inquiry to determine if Sam Altman, the CEO of OpenAI, provided misleading information to the company's select group of affluent backers, according to an exclusive report by The Wall Street Journal (WSJ) released earlier today. 

Following a brief removal from his position last year, Altman was reinstated as the head of OpenAI — the company behind the creation of the highly popular chatbot ChatGPT.  

According to The Wall Street Journal, the SEC is actively requesting internal documents from both past and present OpenAI executives and board members, and sent a subpoena to OpenAI in December.  

OpenAI operates under a nonprofit structure, but its profit-driven branch has attracted investments from its employees, venture capitalists, and notably Microsoft, which has poured $13 billion into OpenAI for what effectively amounts to a 49% share of the profits from its commercial operations. 

Following the news, Microsoft shares were at one point down close to 0.3% at $406.36 in premarket trading on Thursday.  

They quickly reversed their trajectory to trade up 0.3% before market open, spurred by an inflation data release in the U.S. that sent stocks higher.  

The personal consumption expenditures (PCE) price index, which excludes volatile categories such as food and energy costs, increased 0.4% for the month and 2.8% from a year ago — in line with market expectations, as per the Dow Jones consensus estimate. 

OpenAI continues to navigate legal and government challenges after failed Altman ouster 

As OpenAI concluded its recent tender offer, valuing the company behind the widely used ChatGPT at over $80 billion, the SEC's civil probe continued to unfold. This inquiry is taking place against the backdrop of OpenAI's efforts to attract investors, highlighting the regulatory attention the company faces. 

The latest SEC probe adds to a growing list of legal and governmental hurdles that OpenAI is navigating, highlighting the intense scrutiny on the company's operations and its influence globally. It also shines a light on the company's internal challenges, showing the fallout from the controversial attempt to remove Altman from his position last year. 

At the time of leadership turmoil, regulatory and law enforcement bodies, including the Manhattan U.S. Attorney’s Office, began inquiring into allegations by the board concerning Altman’s "lack of candor”, as reported by the WSJ in November. The publication reported that criminal investigation as “ongoing”, although “its focus couldn’t be learned”. 

U.S. and European regulatory authorities have also launched investigations into the competitive dynamics of the partnership between OpenAI and Microsoft, which also holds a commercial agreement with the company. 

OpenAI faces scrutiny as AI boom continues to lift equity markets 

The advent of ChatGPT and similar advanced language models has contributed to a 28% surge in the S&P 500 index over the past 52 months, showcasing the substantial impact of these technologies on the market. 

The AI boom has also multiplied the fortunes of chipmakers and chip designers, such as Nvidia and Arm Holdings, which have seen booming demand for their products. Nvidia stock surged to record highs in the past several weeks and is currently up 56.83% year-to-date.  

A 16.4% rally in the Nvidia stock price last Thursday boosted its market value by $277 billion — the largest single-day gain for any U.S. company, surpassing Facebook-parent Meta Platforms' previous record of $204.5 billion, set on February 2.  

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