Owning Microsoft Stock Has Cost Steve Ballmer Billions

Steve Ballmer was CEO of Microsoft (NASDAQ: MSFT | MSFT Price Prediction) from 2000 to 2014, which was after his friend Bill Gates stepped down. Ballmer was the 30th employee when he joined in 1980. The most important financial decision he made in his life was to hold onto his Microsoft shares. He owns 4% of Microsoft, which makes him the largest single shareholder. That ownership is the cornerstone of his net worth, which Bloomberg puts at $139 billion, which is just behind Warren Buffett.

Ballmer’s ownership has taken a beating. His net worth has dropped by $29 billion this year, as Microsoft stock is down 19% while the S&P is up 2%. Microsoft’s market cap is $2.92 trillion, making it the fourth-most-valuable company in the world.

Microsoft has taken this beating for one reason. It invested $13 billion in OpenAI, which is still considered the industry leader, and got 27% of the company. Part of the deal was that Microsoft would have broad rights to the use of OpenAI’s commercial products. Over time, as OpenAI saw the value of those rights, the two companies became at odds.

The settlement of the battle was vague. In October of last year, the two companies announced, “The agreement preserves key elements that have fueled this successful partnership—meaning OpenAI remains Microsoft’s frontier model partner and Microsoft continues to have exclusive IP rights and Azure API exclusivity until Artificial General Intelligence (AGI).” Investors did not cheer the new agreement.

What has become clear this year is that Microsoft has fallen behind in distribution and “wins” with commercial customers. A look at the Apple App Store shows that OpenAI’s ChatGPT is the No. 1 download. Claude from Anthropic is third. Google Gemini is fourth, and xAI Grok is 20th. Microsoft Co-Pilot is not on the list.

As OpenAI and Anthropic announce more and more enterprise sales, Microsoft is largely quiet. Investors believed that AI-enhanced versions of Azure, Microsoft’s cloud-based business, would get a boost. Its most recent earnings showed that revenue from any such combination would be slow.

Microsoft is well behind in the AI race. Nevertheless, it says it will invest $146 billion in data infrastructure this year. Investors have reason to ask “why”? Ballmer is rich enough that he may not care.