MSFT Stock Dips Overnight: Satya Nadella Calls Anthropic’s Fable 5 ‘Editorially Controlled’ Amid Backlash Over Safeguards

• Nadella reportedly told Microsoft employees that Fable 5 now appears “editorially controlled,” and that some of the model's limits do not “make sense.”
• When users ask Fable about certain topics, including elements of building large-scale AI models, Anthropic may route those queries to an older version of the model.
• Anthropic’s Fable 5 and its parent model Mythos have generated significant attention for their capabilities.

Microsoft shares fell 1.3% in overnight trading, giving up nearly all of Thursday’s gains.

MSFT stock is up 7.5% in July, in line with gains across Big Tech as investors rotate back into the sector while selling some of the year’s high-flying chip stocks. 

Investors are closely watching the moves as the second-quarter earnings season kicks off, with Alphabet, Tesla and Intel reporting next week.

Nadella Questions Anthropic’s AI Guardrails

Meanwhile, Microsoft CEO Satya Nadella has jumped into the debate over the guardrails Anthropic has put in place for its powerful Fable 5 AI, which are also drawing criticism online for being too stringent.

According to a CNBC report, Nadella reportedly told employees that Fable 5 now appears “editorially controlled” and some of the limits in the model do not “make sense.”

“If you use Fable, when it refuses for any random thing, it just is like, when was the last time you had a creation tool that was so editorially controlled?” Nadella told engineers working on Microsoft’s Copilot AI software, according to a copy of his remarks that was provided to CNBC. “It doesn’t make sense.”

When users ask Fable about certain topics, including elements of building large-scale AI models, Anthropic may route those queries to an older version of the model, according to Anthropic’s support page. 

An X user highlighted that Fable 5 directed a user to its Opus 4.8 model when asked a deeper question about cancer research. Others also reported seemingly harmless queries being redirected to the older model.

Anthropic’s Mythos, Fable 5 Attract Scrutiny 

Fable 5 is a scaled-down version of Anthropic’s Mythos AI model, which the company has acknowledged is highly capable of identifying vulnerabilities in technology systems and could be misused for hacking, prompting governments and enterprises to assess its risks and strengthen cybersecurity safeguards. 

Last month, the U.S. government directed Anthropic to restrict access to Mythos and Fable 5 for foreign users and organizations, prompting the company to temporarily withdraw both models. Anthropic later restored them after briefing officials on the safeguards it had implemented to reduce potential misuse.

The development comes as Big Tech and AI firms race to put bespoke AI technology into consumers' hands.

Investors Eye AI IPOs

Bloomberg reported earlier this week that Anthropic will meet with investors and banks leading the offering in the coming weeks, and is looking to list its shares as soon as October.

OpenAI, too, is moving forward with its IPO plans, but recent reports have said its listing could be pushed to next year.

OpenAI now broadly trails Anthropic, based on the most recently disclosed numbers. In April, Anthropic said it tripled its annual revenue run rate to $30 billion, surpassing OpenAI’s ARR of about $24 billion. Anthropic is valued at $1.08 trillion, compared to OpenAI’s private market valuation of $868.3B, according to data from Nasdaq Private Market.

On Stocktwits, the retail sentiment for MSFT shifted to ‘neutral’ from ‘bearish'. The sentiment was ‘neutral’ for Anthropic and ‘extremely bullish’ for OpenAI.

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