OpenAI’s Future IPO Keeps Me Buying Microsoft
Microsoft holds a stake in OpenAI that no public market has ever priced, and one investor argues that gap between the stock and the business is exactly where the opportunity lives.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
I keep buying Microsoft (NASDAQ:MSFT | MSFT Price Prediction), and every quarter gives me another reason to add more. The reason I bring up most at dinner is OpenAI. Microsoft owns roughly 27% of the company behind ChatGPT. That stake was valued at approximately $135 billion when the partnership was restructured. One day the stake will get a public price, and I want my shares in place before then.
Paper Value Wall Street Still Can’t Price
OpenAI is reportedly aiming a valuation of about $1.2 trillion, and its listing now points toward 2027. If OpenAI lists near that figure, a 27% stake would be worth about $324 billion on paper before dilution. That equals roughly 8.5% of Microsoft’s $3.81 trillion market cap. Right now that value shows up mostly as an accounting line. A public market would price it every trading day.
I could wait and buy OpenAI directly at its IPO. I’d rather own it through Microsoft. Microsoft keeps IP rights to OpenAI models through 2032, including post-AGI models. OpenAI also signed to buy an additional $250 billion of Azure services. An OpenAI shareholder owns one model company. I own the stake, the cloud signed, and a platform that gets paid no matter which model wins. Polymarket traders give Microsoft a 0.56 probability of ending the year with a higher valuation than Anthropic and OpenAI combined.
Three Reasons I Keep Adding
First, Microsoft keeps growing at huge scale. Fiscal 2026 revenue reached $331.84 billion, up 17.8%, and Azure passed $100 billion for the first time. For the first quarter of fiscal 2027, management guided Azure growth to approximately 45% in constant currency.
Second, the backlog. Commercial remaining performance obligations, meaning signed revenue not yet recognized, reached $678 billion, up 84%. Without OpenAI, that backlog still grew 25%. Nearly 90% of full-year Microsoft Cloud revenue came from customers outside frontier model companies. The core business stands on its own, and OpenAI adds upside.
Third, the quality of the business. Operating margin is 46.78%, return on equity is 34.04%, debt-to-equity is 0.29, with interest coverage at 50.88x. Microsoft returned over $43 billion to shareholders in fiscal 2026. The 0.69% dividend yield is small, so I own this stock for the compounding behind the payout. At 28x earnings, I think the price for that profile is fair.
Risk I Track Every Quarter
The spending concerns me most. Capital expenditures for fiscal 2026 reached $115.95 billion, up 79.6%, and free cash flow fell 6.5%. Management expects fiscal 2027 capex of about $175 billion. OpenAI losses also hit GAAP earnings: $3.1 billion in the first quarter of fiscal 2026, compared with $523 million a year earlier. And the IPO date keeps slipping.
My case still holds because demand keeps exceeding supply. On the July 29 call, CFO Amy Hood said “Demand continues to exceed available supply”. She called the data center investment “quite flexible”. Microsoft also expects to stay free cash flow positive in fiscal 2027.
Why I Keep Buying Ahead of the IPO
Over the past year the stock moved -0.51%. Over the same period, revenue rose, the backlog grew, and Copilot passed 30 million paid seats. That gap between the stock and the business is my window. When OpenAI finally prices, I want my Microsoft shares already sitting in my account, compounding while everyone else waits for the IPO.
Contact [email protected] for any questions or corrections.
Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
