Microsoft’s (MSFT) shares edged higher early Thursday following a Reuters report that the U.S. tech giant is looking to widen its artificial intelligence bet beyond OpenAI. The Redmond, Washington-based company is considering acquiring several AI startups, including AI model developer Inception, insider sources told the outlet.
Claim 55% Off TipRanks
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks
Microsoft-OpenAI Loosen Ties
The reports come weeks after Microsoft ended its exclusive revenue-sharing agreement with OpenAI, the maker of ChatGPT and the startup that fueled the boom in generative AI. Days earlier, reports also emerged that Microsoft had agreed to cap its revenue-sharing payments to OpenAI at $38 billion.
Since OpenAI was established in December 2015, Microsoft has pumped more than $100 billion into the startup through their partnership, according to a new testimony from Microsoft deals executive Michael Wetter. In October last year, it took a $135 billion, or 27%, stake in OpenAI as the company transitioned to a for-profit business model.
Microsoft Races to Develop Flagship AI Models
However, Microsoft’s relationship with OpenAI — one of the most closely-watched AI tie-ups in the industry — has not been without its challenges. The latest has been the startup’s efforts to secure a $50 billion investment from Amazon (AMZN), the e-commerce giant and a cloud services rival to Microsoft.
The strain appeared on both sides. Microsoft, until recently, relied heavily on OpenAI’s AI models. On the other hand, OpenAI, in a recently leaked memo, also said its ties with Microsoft limited its ability to expand its enterprise client base.
Meanwhile, Microsoft rolled out three new AI models early last month and is looking to deliver flagship AI systems sometime next year.
Is Microsoft a Buy or Sell?
On Wall Street, Microsoft’s shares remain a Strong Buy based on analysts’ consensus rating. This breaks down into 33 Buys and two Holds issued by 35 analysts over the past three months.
In addition, the average MSFT price target of $559.98 implies about 38% upside from current trading levels.
