Microsoft continues to be best exposure to OpenAI, analyst says

Microsoft's (MSFT) 27% stake in OpenAI (OPAI.PVT) is currently valued at $135 billion, according to the two companies' latest for-profit agreement. This all comes ahead of Microsoft's fiscal first quarter earnings results due out after the closing bell on Wednesday.

Intelligent Alpha Founder and CEO Doug Clinton talks more about what his firm's investment in Microsoft represents as an indirect exposure to OpenAI.

Also hear Doug Clinton's other thoughts around AI capex spending and Nvidia's (NVDA) latest partnership announcements.

To watch more expert insights and analysis on the latest market action, check out more Market Catalysts.

Video Transcript

00:00 Speaker A

Another partnership that I want to ask you about that was solidified even more this week was between Microsoft and OpenAI with OpenAI completing um its recapitalization, restructuring and them effectively being almost equal partners in the new, the new structure. Does that mean for you is is Microsoft even more of a buy than ever because of that exposure and that sort of codified exposure?

00:27 Speaker B

Well I'll tell you Julia, at Intelligent Alpha, we use large language models. We're big believers in AI and we use those models to do our stock analysis and portfolio management. Microsoft is a stock that our models like and we own. And so I think the reality is Microsoft continues to be probably the best direct exposure to Open AI, which is obviously the best positioned, I think AI company in the world right now. Uh I think that this partnership and this announcement, it's actually sort of a win-win for both sides in a sense where I think it unlocks Open AI to kind of continue to raise additional capital. They're going to bring on other capital partners in the future because they have huge capital needs. Um and I think for Microsoft, obviously, you know, they have a as you mentioned, very large stake in what I think will probably ultimately be, you know, another multi-trillion dollar company in the next few years.

01:21 Speaker A

Um, and of course that multi-trillion dollar company is coming public in the next few years also. Um, you know, it's too early for you to buy it as a public company for any of us to buy it as a public company. But you know, what do you think that that effect will be in the market? Like does it sort of suck all the air out of the room from everything else when that finally comes public?

01:52 Speaker B

It'll definitely be a watershed moment, I think. and you know, in my view, I've always thought about boom cycles in a very simplistic way, which is when the IPO window really opens up, I think that's when you have to be thinking a little bit more conservatively. Uh where that could be getting more toward the end. Now, Open AI, they haven't gone public. And when they go public, I don't think that is necessarily the end of the AI trade, but what it could ultimately do is kind of open up the window for everybody else. and that's when I think I would really start to pay attention. I think there will be a huge amount of demand to own Open AI for the long-term. You'll have a lot of investors interested in doing that. But I think you'll also see because of that demand, uh other companies will test the IPO waters and likely we'll see a lot of other companies go public that aren't quite the quality of Open AI. And that's when I think you can start to maybe really sound this bubble alarm that we're hearing right now in a more honest way.

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