Elon Musk Lawsuit Puts Microsoft’s (MSFT) $100B OpenAI Deal in Focus

Tech giant Microsoft (MSFT) has spent more than $100 billion on its partnership with AI firm OpenAI, according to testimony from Microsoft deals executive Michael Wetter in federal court. That total includes Microsoft’s original investments in OpenAI, along with the cost of building cloud infrastructure and hosting OpenAI’s computing needs on Azure. Wetter said that many of those costs came before Microsoft generated revenue from the relationship, because the company had to build the infrastructure first before it could provide services to OpenAI.

The testimony came as part of Elon Musk’s lawsuit against OpenAI and Microsoft in federal court in Oakland, California. Musk has accused OpenAI co-founders Sam Altman and Greg Brockman of moving away from the company’s original nonprofit mission and turning OpenAI into a business that benefits private interests. He also claims that Microsoft helped make that shift possible. Unsurprisingly, OpenAI, Altman, Brockman, and Microsoft have denied wrongdoing by arguing that Musk’s claims are baseless and are meant to support his own AI company, xAI.

Even with this legal fight, the partnership has become one of Microsoft’s most important AI bets. Microsoft had invested about $13 billion in OpenAI by early 2023 and became its main cloud infrastructure provider. CEO Satya Nadella recently said that Microsoft targeted a $92 billion return from its early OpenAI investments, while OpenAI’s valuation rose to $852 billion by the end of March. As part of OpenAI’s restructuring last year, Microsoft received a 27% ownership stake, which was valued at about $135 billion as of October.

What Is the Price Target for Microsoft?

Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 33 Buys and two Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average MSFT price target of $559.98 per share implies 38.3% upside potential.