Microsoft-OpenAI Partnership Faces Strains; Retail Sentiment Dips Amid Underperformance Against Magnificent 7 Peers

Microsoft Corp.’s ($MSFT) lead in the artificial intelligence (AI) race is partly attributable to the expanded $10 billion partnership with Sam Altman-led OpenAI. Recent reports suggest there could be trouble brewing in the Microsoft-OpenAI paradise.

Microsoft infused nearly all of its products with OpenAI’s technology, taking a lead over its fellow tech titans.

An Information report published on Thursday suggested that cracks may be appearing in this win-win partnership. The report said Microsoft has put forward conditions for converting OpenAI from a non-profit to a for-profit corporation, which Altman has been striving for.

The report highlighted four areas where Microsoft is seeking changes. These include: 

• Microsoft’s equity stake in a potential for-profit OpenAI

• whether Microsoft will continue to be OpenAI’s exclusive cloud provider

• How long can Microsoft continue using OpenAI’s intellectual property (IP) in its products at will? 

• Will the software giant continue to get its 20% revenue share from OpenAI?

 

The terms of the original agreement struck in early 2023 said Microsoft may lose exclusive rights to OpenAI’s IP once the latter achieves artificial general intelligence (AGI), the report said. The companies reportedly defined AGI as the capability to produce at least $100 billion in profits. This significantly falls short of the rigorous, technical and philosophical definition of AI, TechCrunch said.

Earlier this week, citing sources, a Reuters report said Microsoft was planning to add internal and third-party intelligence models to power its Microsoft 365 Copilot. The rationale behind the reported move was to reduce reliance on OpenAI and slash costs.

Microsoft reportedly confirmed that it is incorporating various OpenAI models as well as it models, while also working on customizing other open-weight models to make 365 Copilot faster, cheaper and more efficient. 

MSFT sentiment and message volume December 26, 2024, as of 8:35 ET | Source: Stocktwits

Retail sentiment toward Microsoft is ‘neutral,’ (49/100) improving from the ‘bearish’ mood that prevailed a day ago, while message volume remained ‘low.’

The retail crowd lamented the relatively low returns for Microsoft stock.

Another hoped for a lift from the Santa Claus rally.

 

A poll conducted among Stocktwits users regarding the year-end price target showed just about 50% think the stock will top $450 and 36% see the stock ending around the current trading range of $430 to $450

Nine predicted a year-end close between $410 and $430, and 6% said the stock will likely end below $410.

Microsoft shares have gained 17% this year, underperforming the Invesco QQQ Trust ($QQQ) and the Roundhill Magnificent Seven ETF ($MAGS), which have gained 30.10% and 72.41%, respectively.

Redmond’s shares closed Thursday’s session down 0.28% at $438.11.

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