Nadella feared Microsoft becoming ‘the next IBM’ as $92B OpenAI return projection revealed at trial
May 12, 2026 – 7:09 pm
Image by: Brian Smale and Microsoft
Summary
Satya Nadella testified in the Musk v. Altman trial that he feared Microsoft turning into "the next IBM." This revelation comes from an internal email where he expressed his concern about Microsoft’s relevance in the AI era. The $13 billion OpenAI investment, driven by a projected $92 billion return, was not a commitment to its nonprofit mission but a survival bet.
Nadella stated that he feared Microsoft could become irrelevant if it didn’t invest heavily in artificial intelligence. A memo from Microsoft president Brad Smith to the board in January 2023 outlined the massive return projection, positioning the partnership as a significant financial hedge against AI’s potential disruption.
Key Points
- Analogy with IBM: Nadella drew an analogy between IBM’s decision to outsource its operating system and Microsoft’s situation with OpenAI. He feared that if OpenAI became the platform and Microsoft the commodity, Microsoft would fade into irrelevance as IBM did in the 1980s.
- Commercial Motivation: Musk’s attorneys presented an email from Nadella emphasizing commercial motives behind Microsoft’s investment, contradicting OpenAI’s nonprofit origins.
- Financial Projection: Brad Smith’s memo projected a staggering $92 billion return on the cumulative investment, with a 20% annual escalator starting in 2025, making it one of the largest financial hedges in corporate history.
- Timing of Investment: The projection was revealed just before Microsoft publicly announced its expanded $10 billion investment in OpenAI, with ChatGPT having been public for less than two months at the time.