According to reports, OpenAI might confidentially file for an initial public offering (IPO) as soon as this week. While reports about the imminent IPO have been floating around for quite some time now, they seem more credible this time around after the ChatGPT parent defeated Elon Musk’s lawsuit, which alleged that the company strayed from his mission by setting up a for-profit corporation.
Musk has vowed to appeal the decision, but the ruling has cleared a key obstacle to OpenAI’s IPO. The listing could be among the biggest ever and would test the appetite for pure-play artificial intelligence (AI) names at a time when opinion over the technology is as divided as ever. While some see AI as a bubble of epic proportions, others see it as a game-changer even bigger than the internet.
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Why Microsoft Investors Should Closely Watch the OpenAI IPO
As tech investors closely watch for the OpenAI IPO, Microsoft (MSFT) investors in particular should pay attention. Microsoft holds more than a quarter of the stake in OpenAI Group Public Benefit Corporation (PBC), and one of the reasons MSFT stock has underperformed is because of concerns over OpenAI losing out on its early lead to Anthropic and Alphabet's (GOOGL) Google Gemini. Moreover, the relationship between OpenAI and Microsoft has been strained over the last year, and the ChatGPT parent courted other companies in its recent funding round.
www.barchart.comLast month, OpenAI and Microsoft amended their agreement. While Microsoft will remain OpenAI's primary cloud provider, it can now serve customers across any cloud provider. Microsoft will also no longer pay a revenue share to OpenAI but will continue to receive its same revenue share from the AI firm until 2030, although this revenure share is subject to a cap. Furthermore, Microsoft’s IP licensing agreement has been amended from exclusive to a non-exclusive license that expires in 2032.
Mutual Dependence Between OpenAI and Microsoft
Notably, in an investor document earlier this year, OpenAI listed dependence on Microsoft among its key risk factors. However, as I noted back then, dependence on the AI startup is a risk for Microsoft, too.
OpenAI is a major cloud customer for Microsoft, and in January, the company said that 45% of its cloud remaining performance obligations (RPO) came from OpenAI. Markets were spooked by the concentration risk in Microsoft’s RPO and are particularly worried about OpenAI’s ability to deliver on its massive commitments.
OpenAI’s Listing Will Be Positive for Microsoft
Meanwhile, OpenAI should raise billions of dollars from its IPO, which will help strengthen its balance sheet and provide the company with the firepower to keep investing in AI infrastructure. Put simply, some of the proceeds from the IPO will simply flow right back into Microsoft’s pockets to pay for Azure compute services.
Moreover, the listing should help Microsoft monetize its massive investment in OpenAI if it so desires. Looking at the numbers, using a potential $1 trillion valuation for OpenAI, Microsoft’s stake in the company would be nearly $270 billion.
Microsoft Stock Looks Undervalued
In the first quarter of 2026, Pershing Square Capital Management trimmed its stake in Alphabet while adding Microsoft. Legendary fund manager Bill Ackman suggested that he finds Alphabet stock overvalued and Microsoft undervalued, even though he remains bullish on the former in the long term.
There are several valuation metrics we can consider. For example, Microsoft trades at a forward price-to-earnings (P/E) multiple of 21.5 times while Alphabet trades at 27.4 times. Over the last decade, Microsoft has traded at a premium to GOOG, but it now trades at a discount. Incidentally, while Microsoft is trading at a discount to its long-term multiples amid “SaaSpocalypse” fears, Alphabet’s valuation multiples have expanded as it has successfully wooed investors with its AI execution.
All said, I continue to believe that the selloff in MSFT stock is overdone. The stock has come off its 2026 lows amid the broader market recovery and should continue its good run in the coming months. The OpenAI IPO would only strengthen my bullishness.
On the date of publication, Mohit Oberoi had a position in: MSFT , GOOG . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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