Microsoft Slips as OpenAI Bet Starts to Worry Investors
24/7 Wall St. • • business
Key Points:
- Microsoft shares declined 2-3% to around $374 despite Bank of America reinstating a Buy rating with a $500 price target, reflecting investor anxiety amid broader tech sector weakness.
- Investor concerns focus on Microsoft's heavy reliance on OpenAI, in which it holds a 27% stake, with OpenAI warning that any changes to their partnership could negatively impact both companies.
- Capital expenditures nearly doubled to $29.9 billion in Q2 FY2026 as Microsoft invests heavily in AI infrastructure, raising questions about near-term free cash flow and execution risks.
- While Azure revenue grew 39% year-over-year and Microsoft has a large backlog of committed revenue, losses related to OpenAI investments increased significantly, complicating the earnings outlook.
- Despite a 23% year-to-date stock decline and market pessimism, analyst consensus remains bullish with a $595 price target, emphasizing strong fundamentals but highlighting concerns over OpenAI dependency and capital spending timelines.
