Sam Altman Out at OpenAI, Plus Charting the Market’s Monster Moves 11/17/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square this is fast Money. Here's what's on tap tonight. A Friday bombshell. Sam Altman fired as the CEO of OpenAI. The board losing confidence in his ability to continue leading the company will have the latest, plus a ripple effect for Microsoft and the big AI players. Also, it's the night of a thousand charts from the dollar to regional banks, to retail and more. But this week's outsized moves say about the state of the market and where these charts might be heading next. And later, wearing the crown, Netflix quietly having quite a memorable month.

0:33The stock is up 30 percent in the last 30 days. What's behind this royal revival? We'll debate that. I'm Melissa Lee, coming to you live from Studio B at the NASDAQ. On the desk tonight, Guy Adami, Tim Seymour, Bono and Eisen, and Dan Nathan. We're going to get into this week's monster market moves in just a few minutes, but we've got to start off with a developing story on OpenAI. The company's board ousting CEO Sam Altman late in the day, saying he was not, quote unquote, consistently candid in his communications with them. Shares of Microsoft, OpenAI's biggest investor, dropping on the news.

1:04Let's get to Steve Kovac for the latest in what we know at this hour. Steve. Hey there, Mel. Yeah, this is the big surprise in Silicon Valley today. Sam Altman, the face of the janitor of AI boom and CEO of OpenAI. He's out of the company. OpenAI board saying in a statement, quote, Mr. Altman's departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities, adding they no longer had confidence in his ability to run the company. Now, Mira Maradi, the OpenAI chief technology officer, she was named interim CEO.

1:41Altman just putting out a tweet, though, on X saying, I love my time at OpenAI. It was transformative for me personally and hopefully the world a little bit. Most of all, I loved working with such talented people, end quote, adding he'd share more later and posting a salute emoji. This also has huge implications for Microsoft, as you said, which has invested billions in OpenAI for exclusive first access to some of its technology, not to mention running its services on Azure Cloud. For now, Microsoft's saying it plans to continue its partnership with OpenAI. Spokesperson telling me, quote, we have a long-term partnership with OpenAI and Microsoft remains committed to Mira and their team as we bring this next era of AI to our customers, end End quote.

2:25Shares of Microsoft took a dip lower, though, on the news, down better than one and a half percent at the close. Now, this is a real shocker, guys. Altman was speaking at the APEC event just last night. He was the keynote speaker and was part of the dinner with China's President Xi, along with other tech CEOs like Apple CEO Tim Cook. Now, the big question is whether or not this weakens OpenAI and therefore Microsoft's head start over Google and others in generative AI. Google just had to delay its update called Gemini that would compete with a better version of the latest version of ChatGPT, that is.

2:58And another startup to watch, Anthropic, whose technology is largely on par and similar to open AIs and now has the backing of billions from Amazon. Melissa? Steve, thanks. Keep us posted on development. Steve Kovac back at headquarters. A lot of questions still regarding exactly why he was fired, what he was not candid about in terms of communications. Was it the business? Was it something else? If it was the business, then, of course, that has an implication in terms of valuation of the company, Dan. So we still don't know a lot. Yeah, listen, this is seismic. And when you think about that Microsoft investment of$10 billion that happened in January of this past year, I think the valuation was just under$30 billion.

3:35Money was raised in this name at$80 billion. Right. And so when you think about a guy like Sam Altman, to many of our viewers who are maybe very familiar with a lot of publicly traded CEOs that we talk about all the time. I mean, this guy is like the golden child in the private markets over the last 15 years in Silicon Valley. So when you think about the competition with Google, with Anthropic, with a whole host of other companies, you know, for talent. I mean, Sam Altman, who used to run Y Combinator, was very important in that. So when you think about the implications for Microsoft or just the landscape as it relates to generative AI right now, it's talent, it's capital, it's a whole host of other things.

4:11And it's also execution and bringing products out. So to me, listen, Microsoft, should it be down on this? I don't know. Like, where they invest in this company, what they've secured as far as, like, you know, what open AI has to do with Azure and the like here. It's a good deal for them. I mean, trust me, but, like, this thing could get cut in half, which actually has happened in many of large publicly traded companies or private companies over the last few years. And it really still wouldn't be a problem for Microsoft. We were just talking about this before the show started. Where was Microsoft at the time of the investment?

4:40$242. $242. Yep. And where is it now? $369? And change. So down 2 % is not much. But still, you've got to wonder, I mean, if it's going to knock the valuation of OpenAI, it's got to knock some of that, whatever you want to call, that AI pixie dust, AI fluff, AI premium. Totally. And if you think about how viral ChatGPT was and the impact on other companies' valuations, I mean, it was a moment in time we'll never forget. And there's no question significant value is accreted to Microsoft and Microsoft effectively at all time highs here. So I don't think it dethrones them. I don't think, you know, the reality is that the competitive landscape is closing in fast.

5:18And we see this in other places, too. It's probably why Dan thinks Nvidia is at some point absurdly priced, too. But this is what the market is grappling with right now. I mean, I think it's hard to spin a CEO ouster as a positive. So I'm going to stop short of trying to do that. With that said, there's very little information here. I don't know exactly what he was in Canada about. Are we saying that he's lying? Was the communication just not up to par with what the board wanted? Either way, I'm going to wait until I see the succession plan. With that said, I do think the stock price in Microsoft, or the price action, rather, that you're seeing post-news is indicative of the premium that has been assigned to AI.

5:49And that goes for Microsoft and everyone else. So I'm going to kind of sit on my hands and wait and see before getting involved in Microsoft stocks. I'm long it. But with that said, I do expect them to continue to come up with a succession plan and be able to capitalize on generative AI. At minimum, though, Guy, what we know is that he is gone. At minimum, Guy, what we know is that he was a tremendous talent and he was a great ambassador in terms of what the power of AI will be in future generations. And he is gone from OpenAI and from the company that Microsoft invested in. So what does that mean?

6:23It's more to the story is what it means, I think. And, you know, it's rather abrupt. I mean, Steve mentioned that he was speaking, obviously, you know, in his role, in his capacity last night. And then today this happened. So the abruptness is concerning, number one. Number two, I guess to a certain extent, we'll have a guest on to speak to this. There's clearly some key man risks associated with this. So we'll see. Microsoft, look, we all know it's a$2.7 trillion company. So even if you're talking about reducing open AI down to nothing in terms of valuation, it doesn't move the needle. But it clearly moves the needle in terms of market sentiment.

6:57So if you put up a Microsoft chart, you will see that in December of 2021, at the time the stock made an all-time high,$345. It sold off in July of this year, traded right back to 345. We sold off down to 310. And now here we are. So that past resistance should become support. So given the news and given what we're probably going to hear over the weekend, I don't think that 345 is a pipe dream, especially given the fact that Microsoft has gone from 310 to 375 in the blink of an eye over the last week and a half or two. Do you think we're going to look back at this moment, Dan, and think that was a moment a lot of the air came out of the AI bubble.

7:34It could be. I mean, like, think about this. I mean, Sam Altman, assuming that there was no impropriety or anything like that, he's probably going to start another AI company, right? And so it just creates more of a competitive sort of nature. There's going to be capital that flows to him. I think it's more important that you think about the money that was attracted to this space, both publicly and privately. And you use the term pixie dust. I mean, we already went through this period with, you know, a whole host of other asset classes, crypto to be one of them, FTX a year ago. You think about the lack of due diligence that was done chasing some of these big, big ideas that have the potential, obviously, to be very transformative.

8:05But when you see valuations in private markets, OK, skip up tens of billions of dollars in a matter of months, there's no real due diligence that's being done here. So when you think about this, I think we will easily look back and say this was a bubble. You know what I mean? Like, could it continue to flate a little bit? But again, if you just think about the broadening out of competition for talent, for capital, for resources, that's probably what happens from here on. But the moral of that story in terms of the analogy to Sam Bankman-Fried and FTX is that what has Bitcoin done since then? It's one of the best performing asset classes this year.

8:38It's done very well. I mean, it's come out of that winter. I also think you just have to look at the reality of, you know, apparently 90 percent of the Fortune 500 companies are using some type of tools on OpenAI. I mean, on ChatGPT and building off those platforms. So, I mean, the head start, there's no question about it. And I don't know that this does anything to change the addressable market and the demand around AI anywhere. I think it just levels the playing field more. All right. For more on Sam Altman's departure from OpenAI, let's bring in Alex Kantrowitz, big technology founder and CNBC contributor.

9:08Alex, thanks for coming by. What is your take on the news? What is the biggest implication here in your view? I think OpenAI was already a company that was going to be on the decline. And what I mean by that is that we're in a moment where everybody has access to the same technology that OpenAI rose to fame. The transformer model developed within Google was something that OpenAI used very successfully to create incredibly popular products like ChatGPT and Dolly. But now everybody's coming for them. You have Anthropic founded by ex-OpenAI employees that's been funded to the tune of billions by Google and Amazon.

9:40You have Elon Musk with his own model, though we'll see where that goes. And then you have Google that's in the middle of it's delayed, but releasing its own more powerful, potentially more powerful model called Gemini coming at OpenAI. This is a moment where they were vulnerable. They needed to put their best team forward in order to compete. And now they've lost their quarterback. So it's an incredibly poor timing moment for OpenAI to have this happen to them. It's concerning for Microsoft, which put all of its eggs in the OpenAI basket. And we're going to see it's going to reshuffle the way that this AI battle has been playing out.

10:11So who gains from this if OpenAI is weakened? So Google gains, obviously, because they not only have that anthropic investment, but they have Gemini coming out. But I think the big winner is going to be Amazon. Amazon has been about bringing your own model and using it within the Amazon Web Services ecosystem. Now, Microsoft has taken down a peg. Microsoft, of course, is their main competitor for cloud services with Azure. So you now have Amazon in a strength position saying anybody can come to us. By the way, like the CEOs that we work with, they're still in their jobs. And I think that's going to put them in an even stronger position to take the lead in this battle.

10:47So clearly the argument is that this changes the competitive landscape. To what extent do we think that Microsoft has had a moat or a head start? Or do you think that given the price action that we've overvalued that head start and that will come to bear fruit going forward? They've had a tremendous head start. I mean, the last earnings report, they said they went from 11 ,000 people on their OpenAI service to, sorry, yeah, from 11 ,000 to 18 ,000. A huge jump to get 7 ,000 enterprise clients to jump on in a quarter is unheard of. So they had that head start. But there's a natural path that all these companies take.

11:24They begin on OpenAI because it's easy and it has that head start and they have the APIs. Then they move to a model where anybody can, where they can use any model. They can substitute OpenAI in with Anthropic and put whatever they want in, and the product works the same so they can pick their best model. And then the bigger they get, they move open source, right? That's something like Facebook has been shipping with Llama, too, because they want the customizability. So OpenAI was going to be weak, and now we're going to start to see this Darwinism within the AI world just start to accelerate.

11:53Your initial premise is that OpenAI was already on the decline. Was the entire space on the decline already in terms of valuation? Did we see peak valuation? And does this hasten that decline? Well, the valuations have been wild. I mean, thinking about the way that the market has valued AI companies has been crazy, right? But I think that this shows that OpenAI on the decline shows the opposite, which shows that actually this space is on the rise because it's not just the OpenAI show anymore. You have very powerful companies, Google and Amazon getting in, and Anthropic is going to pose a serious challenge.

12:27So as opposed to saying open AI is declining, everybody's going to go down, it's more just a system of like you built your products on commoditized software. Now everybody's using that and getting in the game. And so that's a sign of strength for AI. And now, I mean, these companies that were behind, they're going to be even further incentivized to push their foot to the gas pedal, seeing a moment of weakness in open AI. So I expect this field to only accelerate from here. Alex, thanks for coming by. Thanks for having me. Guy. Yeah, I'm reading a tweet from Gene Munster. So, you know, and I'm sorry, but Sam Altman out as OpenAIS CEO.

13:02I'm shocked. He just hosted a great development day. Everybody loved it. More importantly, he has led the company to faster success than any other tech company. It doesn't feel that this decision is based on performance. There must be more to the story that you guys putting up now. So, you know, that's sort of what we said at the top. And I don't know what more to the story means. But I also know that, you know, we find ourselves in an environment when we get news like this. It's typically sell first, ask questions later. And we'll see what happens on Monday as more news comes out. Yeah. I mean, particularly in a space that has enjoyed huge valuations.

13:35I mean, we're going to talk about NVIDIA a little bit later on in the show. That's the next big earnings report to be released next week on the 21st. Do you think this changes at all the prism through which we evaluate AI focused, AI leveraged companies? I don't know. Well, first of all, I mean, we don't know what this means to Microsoft. And yet we have been able to interpolate the market cap dynamics that went on with the company. But I don't, again, I think this is what Alex was also saying. I think the space right now looks more competitive than ever, looks certainly more integral than ever.

14:08And success here for a handful of companies probably is critical. Let's turn out to the markets this week. The Nasdaq and S &P 500 up more than 2 percent. The Dow lagging the group, but still nicely higher. Digging deeper on the S &P, it is up 13 out of the last 15 sessions and up nearly 10 percent during this hot stretch. With the markets experiencing in November, to remember so far, we asked the traders for the one chart that is top of mind for them. So Bonoan is picking 10-year Treasury yields. Why? Listen, I think the macroeconomic story is really what's been driving performance over the last, you know, one to three months.

14:43And you see that we've backed off from just north of 5 percent to just shy of 4.5 percent. And I think that's really pushing forward this narrative of actually finding this Goldilocks soft landing. And I think as you've seen Yield retreat, you've seen technology, just speaking of AI and Microsoft and others, you've seen a rally in those names and you've actually seen a flight of capital into some of the underperformers as well. And so I think this is really the tail that's wagging the dog. And that's squarely where I'm focused. Dan, one dog that is being wagged is what you picked. Yeah, this is a Russell 2000.

15:14So this is a small cap. And if you think about all those macroeconomic factors that Bono speaks about, I mean, yes, fine. Yields have come in here. The dollars come in here a little bit. You know, oils come in a whole heck of a lot. But the way that the small cap stocks act, to me, is not particularly great. And when you think about it, there's a lot of financials in there. And we know that, you know, a lot of these regional banks have come off the mat in the last couple of weeks. But up 10 percent, OK, off of a key, key support level. We can back that chart out maybe to a five-year or so. So this thing is just not even getting going here, you know, despite what we've just seen in the S &P and the Nasdaq over the last, you know, two, three weeks or something like that.

15:49So to me, this was a leading indicator late 2021 when the Fed started raising interest rates. And it just made a new all time high and then started to lead lower to the downside. And the S &P followed. So I expect a retest of this one. And I expect the S &P and the Nasdaq to probably follow suit. Guy, yours is the VIX. Why? Yeah, well, September, the VIX traded, I think, as low as 1280. We got up to 24. And here we are back below 14, you know, 13 and three quarters or so. And I would just submit, you know, a VIX as we get down to these low teens, you know, single low single digits. That is typically a place where the market starts to encounter some sort of difficulty as it continues to try to move the upside.

16:29So I would submit a VIX at these levels is not pricing in any of the sort of the headwinds or some of the risks that are out there that haven't gone away, despite the fact that yields have come down. I think people think that yields are a sell for everything. But quite frankly, the problems that were around at 24 VIX, I still are here at 13 and a half. So the VIX to me is an important tell. Tim, what's yours? It's the dollar. And to me, the dollar also is always sniffing out central bank policy, sniffing out Fed policy. Really, the dollar peaked when I think the Fed peaked. You could go back to last October, but you could go even just to November 1.

17:03The move in the dollar this week, week over week, is about 1.8 percent. Obviously, that prices in a few things. You had the Fed meeting, you had CPI. So you've taken some of the pressure off on rates. But I think ultimately it's very important for risk assets. It's very important for the commodity complex. That's the one brain cell. But I think you think about multinationals, you think about earnings power, you think about demand. I think, you know, the dollar is not going to crater here. There's a lot of other factors at work. But we've been waiting for the dollar to weaken. I would argue the dollar has been in a 12 year bull market.

17:35So it's not going to change overnight. But this is important. Coming up, chart master Carter Worth takes us on a journey through three key areas of the market to find out where they are heading next. He's got the technical tale of that tape next. But first, Netflix and Thrill, the streaming stock soaring more than 30 percent in the last month. Can anything stop this one? We'll debate that. More Fast Money right after this.

18:03Welcome back to Fast Money. What a difference a month makes. Shares of Netflix have been starting to lose steam heading into its Q3 earnings report last month. The stock had fallen nearly 30 percent from its July highs through mid-October, but it has been on a tear since those earnings, nearly recouping all the losses in just a month. Is there any stopping the stock now? Tim, you flagged this remarkable move. It's 35 percent in 22 sessions since that earnings release, a release that showed probably upside to free cash flow generation this year. That's what separates them from the pack. I think you've also had a period where it's been a little bit mixed within the ranks of the other streamers.

18:37Obviously, Disney's had some strength here, too. Netflix, from a profitability perspective, is so far ahead, also positioning in terms of content and actually efficiency there. It's just really it's back to this was a relatively attractive valuation. It's not attractive. And at this point, I think around these levels, which gets you right back to those highs before it actually had to sold off into earnings. I think you're cautious here. Cautious, but I'm not inclined to fight the trend here. It's had a remarkable move. And as you mentioned, it really is the best house. Now, we can argue whether or not the neighborhood is one that we find to be attractive, but they are head and shoulders above all other streamers.

19:13And I think Disney is probably second in class only because they have the parks that is able to support them. But that's essentially paying for streaming. So you're getting that business for free. But move, you know, the move notwithstanding, I do think that, you know, 35 percent in less than a month does give you some pause. I'd be more inclined to sell some upside calls than get outright. I'm going to channel my inner Karen Feinerman. Maybe it shouldn't have been down there in the first place. So if 35 percent is an artificial point in time against which to judge the move in the stock. I mean, that being said, Karen, I'm calling her Karen.

19:50No, no, no, no, no. But that being said, you know, the stock. Which is a compliment. You know, into that Q2 print, right? So this was over the summer. The stock was trading a new 52-week high, and it gapped lower. Do you remember that? And then it went down almost 30 % right up until it just reported that Q3 number and gave that guidance. And so it was down 30%. Now it's up 30%. I mean, to me, I think, to your point, if you're long it, you look to do something to kind of, like, take in some premium, that sort of thing. Playing for a breakout here does not seem like a great do, in my opinion. I think a lot of the good news is in the stock.

20:20I think if you look at the valuation, at Tim's point, it's trading about 30 times next year's expected EPS growth of about 30 percent, which is pretty good, right? Like that ad-supported tier and some of the stuff that they've done, you know, to get back the password sharing and everything like that. That's just all good for margins and that sort of thing. But one thing I'll just say is if you just look at the volatility of the stock over the last couple of quarters, look at all these big gaps. I mean, there are major shifts in their business. So right when you think you got it after one quarter, sometimes it goes the other way, too.

20:46And when expectations are high, it's not usually a great time to be buying the stock. What's your best guess, Guy? Higher or lower from here? Leave that chart up for a second. And I'll say, I will answer your question. But I'll also say, I mean, this is a stock that went from$700 to$185 in pretty much a straight line a couple of years ago. So if you look, I mean, that July top was$485. We obviously pulled back. We're approaching that now. I mean, there's a chance that we could sort of levitate to that number. But, you know, given the magnitude of the move and given the fact that it's going from a high teens multiple to 30 times next year's numbers, my inclination is, you know, if it gets to 480, you sell it and look for a better entry point.

21:24All right. There's a lot more fast money to come. Here's what's coming up next. Chock full of charts. The technicals are telling titillating tales about the market right now. But what kind of path are they charting now? Chartmaster Carter Worth stops by to do some detective work in three key areas of the market. But first, another major advertiser is stopping its spending on the platform formerly known as Twitter. What it could mean for the social media space. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

22:06Welcome back to Fast Money. Apple, the latest company to pause all advertising on X, Elon Musk's social media company, according to Axios. The news comes after Musk agreed with an anti-Semitic posting on the platform the other day. Earlier today, Lionsgate said it would suspend ads on X as well. IBM did the same yesterday. Will this trickle turn into a flood of advertisers taking a pause? And when does all of this start to impact Musk's bread and butter? Tesla. We discussed this briefly yesterday. It started to snowball today as we put it back in the show tonight. What do you think? We'll see.