In an investor document that looks quite similar to draft IPO filings, OpenAI listed dependence on Microsoft (MSFT) as among the key risk factors. The document listed several other risk factors, including a possible global chip shortage and ongoing litigation, including the one from Elon Musk. Let’s take a closer look at Microsoft and examine why the mutual dependence is a risk for both companies.
In its investor document, OpenAI wrote, “If Microsoft modifies or terminates its commercial partnership with us, or if we are unable to successfully diversify our business partners, our business, prospects, operating results and financial condition could be adversely affected.”
Microsoft has been among the earliest and biggest backers of OpenAI, but the relations between the two have been strained. The ChatGPT parent is said to be contemplating cutting Microsoft’s revenue share, which currently stands at 20%, after 2032. The two companies are also competing on some fronts, and while Microsoft is developing its own frontier artificial intelligence (AI) models, OpenAI launched its AI-powered search browser ChatGPT Atlas, which would compete with Microsoft Bing.
Earlier this year, OpenAI secured $110 billion in funding in a round involving Amazon (AMZN), Nvidia (NVDA), and SoftBank (SFTBY). In their joint statement following that announcement, Microsoft and OpenAI said that their “partnership remains strong and central” and that the announcement does not “in any way change[s] the terms of the Microsoft and OpenAI relationship” that they announced in a joint blog in October 2025.
Meanwhile, as part of the funding from Amazon, OpenAI signed a $50 billion cloud deal with Amazon Web Services (AWS). Microsoft is reportedly considering a legal action over that deal, alleging that it violates its exclusive cloud deal with OpenAI.
While OpenAI has listed its reliance on Microsoft as a “risk,” dependence on the Sam Altman-led AI startup is a risk for Microsoft, too, which was on full display when the company released its most recent quarterly report.
In their fiscal Q2 2026 earnings call, Microsoft said that its cloud remaining performance obligations (RPOs) more than doubled year-over-year (YoY) to $625 billion. However, the company disclosed that nearly 45% of these came from OpenAI. Markets were spooked by the concentration risk in Microsoft’s RPOs and are particularly worried about OpenAI’s ability to deliver on its massive commitments. The concentration in Microsoft’s cloud RPOs was among the reasons the stock plunged following the confessional despite the company beating on headline numbers.
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Microsoft is a major investor in OpenAI, and last year it disclosed that following the reorganization of OpenAI into a for-profit entity, it held a 27% stake in OpenAI Group PBC (Public Benefit Corporation), which was then valued at $135 billion. Notably, while Microsoft has been recording the gains on its investment in OpenAI, it has also been adding its share of losses in the ChatGPT parent in its books as it accounts for the investment under the equity method.
Meanwhile, Microsoft has been trying to allay fears about the relationship with OpenAI following the latter’s recent funding round. Responding to a question on similar lines at the Morgan Stanley Technology, Media, and Telecom Conference earlier this month, CEO Satya Nadella said, “…even the latest partnerships they have are all fine by us because at some level, our exclusivities, our revenue share, our equity partnership is all sort of what’s going to be healthier because of all this.”
The relationship between OpenAI and Microsoft looks complex, though, and in 2023, Altman said that while the relationship with Nadella wasn’t “perfect,” he emphasized that it was “nowhere near the frenemy territory.” I would argue that while both Microsoft and OpenAI have a stake in each other’s success, the former, in particular, would want OpenAI to succeed, as it would yield gains on its investment and help propel the revenues of its cloud business.
One of the reasons Microsoft stock has underperformed over the last few months is because of concerns over OpenAI losing its lead. The ChatGPT parent has been facing stiff competition from Alphabet (GOOG) (GOOGL) and Anthropic, which have raised their game. OpenAI continues to struggle with burgeoning cash burn and is closing its Sora short-video app in an apparent bid to cut costs.
All said, I believe MSFT stock has received far more punishment than it deserves. The stock is down over 22% this year, which makes it the worst-performing “Magnificent 7” stock. MSFT underperformed the markets in the previous two years, also.
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Microsoft’s valuations have also taken a beating, and it now trades at a forward price-to-earnings (P/E) multiple of 23.2x, significantly below the average over the last five years. I remain constructive on MSFT stock given the tepid valuations and added more shares amid the recent selloff. While the stock is currently out of favor with markets, I would remain patient and use any further dips to add more shares.
On the date of publication, Mohit Oberoi had a position in: MSFT, GOOG, NVDA, AMZN. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
