While Microsoft (MSFT) remains deeply tied to OpenAI (OPAI.PVT), the winner of Yahoo Finance's 2025 Company of the Year award, Wall Street sees the real story in how the tech giant is carving out its own leadership in the booming AI race.
This shift could propel the 50-year-old company—known for Windows, Azure cloud services, and its Copilot chatbot—to add trillions more to its market cap over the next decade.
"With the AI revolution entering its next growth phase, Microsoft could surpass a $5 trillion valuation by 2026," said Dan Ives, tech analyst at Wedbush Securities. Currently, Microsoft's market cap stands at $3.59 trillion.
Though Microsoft's march toward $5 trillion is steady, OpenAI remains a critical piece of its AI strategy.
"We see many players across the ecosystem aligning with us to help shape the future," OpenAI CFO Sarah Friar said in an exclusive interview. She added that compute power is the "cornerstone" of AI's next era, and OpenAI will likely continue partnering with third parties—Microsoft being a key ally—to meet demand.
Microsoft co-founder Bill Gates, in a separate interview, expressed enthusiasm for the company's AI investments but noted the field still carries "significant uncertainty" despite rapid progress. He predicted AI would become "highly impactful" within three to five years, with Microsoft firmly positioned as a top contender.
The partnership began in 2019 when Microsoft invested $1 billion in OpenAI, securing early access to cutting-edge AI models. In return, OpenAI gained compute resources, infrastructure, and long-term stability. For Microsoft, the deal was a strategic bet that AI would be the next transformative platform after Windows. Since then, Microsoft has invested roughly $13 billion in OpenAI, CEO Satya Nadella confirmed.
Despite OpenAI's $500 billion valuation post-revised agreement in late 2025—with Microsoft holding a 27% stake—experts argue Microsoft's future isn't tethered to its stake in what CEO Sam Altman calls the "largest nonprofit in history."
While OpenAI opened doors for Microsoft, the tech giant's real advantage lies in building an AI ecosystem where rivals must compete on its terms.
**Beyond OpenAI: Microsoft's AI Dominance** Microsoft's AI strength stems from embedding the technology across its full-stack offerings—from Azure and Office to developer tools and consumer products like Bing and Edge.
The best example is Copilot, its generative AI assistant, now integrated into productivity apps (Microsoft 365), Windows, and developer tools (GitHub Copilot).
"Microsoft's ability to weave AI like Copilot into its entire product suite gives it a unique edge," said Logan Brown, founder of software platform Soxton.AI. "Most enterprises rely on Microsoft's infrastructure."
A Microsoft spokesperson highlighted seven key AI trends for 2026, including productivity boosts, enhanced security for AI agents, and closing gaps in healthcare.
Investors increasingly see Microsoft reducing—not deepening—its reliance on OpenAI.
"Microsoft is hedging risks by developing in-house AI while leveraging OpenAI," said NYU Stern professor Robert Seamans. This dual approach lets Microsoft tailor solutions for its "massive customer base."
**Divergent Views on OpenAI's Role** RBC analyst Rishi Jaluria credits Microsoft's early OpenAI investment with granting it a "multi-year head start" in AI, including IP rights and research sharing.
"But no one wants Microsoft overly dependent on OpenAI—or OpenAI reliant on a single partner," he noted.
Financially, OpenAI's contribution to Microsoft is limited. Despite its 27% stake, Microsoft only books proportional losses, not profits. Gains hinge on OpenAI going public or turning profitable—both uncertain.
DA Davidson's Gil Luria estimates just 17% of Azure's revenue comes from AI, with only 6% tied to reselling OpenAI models. The bulk (75%) stems from Microsoft's own Azure AI infrastructure. "OpenAI helps, but Azure AI is the real growth driver," he said.
**A Looser, Still Vital Bond** The revised partnership gives both sides flexibility. Microsoft lost "first refusal" rights but retained long-term IP licensing (including AGI rights) and favorable API terms—key as it earns fees when companies like Salesforce or ServiceNow use OpenAI's APIs.
OpenAI's eventual IPO may shift dynamics, but analysts doubt it will weaken Microsoft. Meanwhile, OpenAI now partners with Oracle, AMD, and others, while Microsoft diversifies with investments like $5 billion in Anthropic, which committed to $30 billion in Azure spend.
Capital Bank's Jackson Ader sees this as Microsoft "pursuing independence," not just hedging risks. "Diversifying partners makes sense, but Microsoft still works with the best—OpenAI."
**Microsoft's AI Future** Experts say Microsoft's decade-long edge lies in its broad AI integration. Jaluria highlights Azure's model training, GitHub Copilot, AI-powered Office, and even LinkedIn and Activision Blizzard's potential.
"No other company has such a comprehensive portfolio," he said, rating Microsoft a "Buy" with a $640 target.
The next breakthrough? Agent AI—multi-step task automation—where Microsoft could lead alongside ServiceNow and Salesforce. Though Copilot adoption is early, Jaluria expects steady growth as AI blends into workflows: "Office will be Microsoft's AI gateway."
**Risks Ahead** One concern is overinvestment. Microsoft plans $80 billion for AI infrastructure in FY2025, while reports suggest a $100 billion "Stargate" project with OpenAI, now a $500 billion consortium including SoftBank and Oracle by 2029.
Ader warns if AI demand slows or rivals outpace GPT models, Microsoft's spending could be "overkill—like buying a Ferrari when a Prius would do."
Another risk? Market sentiment. "Even with strong fundamentals, Microsoft could get dragged down if AI hype fizzles," he noted.
Despite risks, most analysts agree: Microsoft remains a top AI investment for the next decade. OpenAI gave it a head start, but its expanding AI partnerships ensure it won't rely on any single model to thrive.
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