Dougie Kass
Hedge Fund Manager, President of Seabreeze Partners
Microsoft's outlook may be more perilous than the consensus recognizes, because few commentators understand how much of its revenue depends on OpenAI. As @GaryMarcus notes, OpenAI, Microsoft's biggest customer by far, is burning billions a month with no obvious way to meet its future obligations, even as the market rallies on optimism about Microsoft's revenue. x.com x.comÂ
Microsoft's $13 billion OpenAI investment may be impaired, because OpenAI's CFO Sarah Friar has worried, per Bloomberg, that the company might not be able to pay for future compute contracts if revenue does not grow fast enough. OpenAI, valued at $852 billion, has no real profit and burns through GPUs and investor cash. That would accelerate Microsoft's already sizable decline this year. x.comÂ
AI hyperscalers' heavy bond issuance can crowd out the corporate AI spending they depend on. After hyperscalers flooded the bond market all summer, a company rolling its Covid-era debt 5% higher has less left for an AI budget. And if every valuation and megatech management guide rests on commitments from Anthropic and OpenAI, they rest on unaudited financials never reported to the SEC. x.com x.comÂ
Microsoft's OpenAI exposure is a very good reason to keep it alongside Anthropic exposure through Alphabet and Amazon. The prior thought of reducing or exiting Microsoft has given way to a tentative hold, with no plans to add for now. x.comÂ
Alphabet may use AI-enabled Workspace and bundled pricing to win Office 365 subscribers. There is a real chance of conquest, while standalone OpenAI and Anthropic lack a competitive bundled-pricing response that could support their valuations. x.comÂ
Microsoft's revenue dependence on OpenAI is a negative, though not as bad as expected. Of Azure's more than $100B of fiscal 2026 revenue, $24B came from OpenAI. Replying to @sv_techie, who heard 70% of Microsoft's AI revenue comes from OpenAI: it is unclear how AI revenue is quantified, but the Azure figure is solid. x.com x.comÂ
Diversified cash flows in the billions make the AI-buildout basket more appealing than standalone model companies. Many members look reasonably priced and have longer records of delivering returns; Anthropic and OpenAI look much more like gambles at current valuations, though either could appeal at the right price. A possible equal-weight portfolio to revisit in five years includes Amazon, Alphabet, Microsoft, Meta, Oracle and SpaceX. x.com x.comÂ
Microsoft is the most exposed big tech company in the AI spending wave, and an AI writedown would land on it first. It had a genuine moat that needed almost no capital, but pledged $80B in data center spending, canceled Claude Code licenses because token costs were untenable, and tied its destiny to OpenAI, which it does not control. x.comÂ
AI's threat to incumbent tech makes SpaceX the preferred investment for the next decade. AI has begun taking business from Google, with Amazon and Apple next; Microsoft's 27% workforce reduction program signals desperation. x.comÂ
Microsoft's salesforce and governed platform unlock AI spending at conservative firms. Faster enterprise than consumer AI adoption makes it effectively the only pure play. M365 Commercial may top 20% growth next quarter, sooner than expected on tonight's guide; GitHub resegmentation helps, but it should do so this year anyway. Azure and M365, two-thirds of revenue, should grow above 50% and 20% and may accelerate. $24-25 CY27 EPS remains achievable, implying under 22x forward earnings. x.com … Show more
Microsoft's insatiable-demand story now hinges on OpenAI growing revenue into commitments it may not be able to fund. OpenAI's compute commitments have risen to $750B through 2030 from $600B, including $250B more for Azure, which its own CFO has privately doubted it can fund. That gap is now the real risk. x.comÂ
