OpenAI Secures New Funding Round, Valuation Set to Reach $800 Billion
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
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Should l Buy MSFT?
Source: CNBC
- Massive Funding Round: OpenAI is finalizing a funding round exceeding $100 billion, which is expected to elevate the company's valuation to $800 billion, significantly enhancing its capacity for innovation and development in the AI sector.
- Thrive Capital Investment: Joshua Kushner's Thrive Capital invested approximately $1 billion in OpenAI at a $285 billion valuation last December, indicating a strong commitment and trust in OpenAI's long-term potential.
- Strategic Investor Participation: About 90% of this funding round is expected to come from strategic investors like Nvidia, SoftBank, and Amazon, reflecting robust market confidence in OpenAI's future and potentially accelerating its technology deployment and market applications.
- Close Executive Relations: OpenAI CEO Sam Altman has a close relationship with Kushner, expressing gratitude on social media, which highlights their collaborative efforts in commercializing artificial intelligence technologies.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 401.720
Low
500.00
Averages
631.36
High
678.00
Current: 401.720
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
About the author

Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
- Impressive Stock Performance: Microsoft's stock has surged approximately 680% over the past decade, transforming a $10,000 investment into $78,010, significantly outperforming the S&P 500's 260% return, highlighting its strong market appeal and investment value.
- Strong Cloud Growth: Microsoft's Azure cloud segment achieved a 39% year-over-year revenue growth in the latest quarter, with a backlog of $625 billion, indicating its leadership in the generative AI space and a high-margin business model that investors favor.
- Valuation Adjustments Impact: Microsoft recently lost its premium status, now trading at a market-matching P/E ratio, which has affected investor confidence regarding its future growth, particularly due to valuation fluctuations from its 27% stake in OpenAI.
- Optimistic Future Growth Outlook: Despite recent stock sell-offs, Wall Street analysts project a 16% revenue growth for this fiscal year and 15% for the next, suggesting that the company's robust performance in AI infrastructure will continue to support its long-term growth potential.
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- Massive Funding Round: OpenAI's announcement of securing $110 billion in funding at a pre-money valuation of $730 billion and a post-money valuation of $840 billion alleviates concerns about its ability to pay bills, positively impacting Microsoft and Oracle.
- Contract Funding Assurance: The new capital will support OpenAI's $250 billion compute contract with Microsoft and $300 billion contract with Oracle, ensuring its funding needs for the coming years and further solidifying its market position.
- Microsoft Valuation Boost: Analysts expect a significant increase in the value of Microsoft's stake in OpenAI, estimating that if diluted, Microsoft's ownership could be worth around $200 billion, or about 7% of its market cap, making its current valuation multiples more attractive.
- Oracle's Execution Challenge: While the funding round initially seems positive for Oracle, analysts express concerns about its ability to execute contracts effectively, especially as discussions shift to the ROI of AI and the growing commitment between OpenAI and Amazon Web Services.
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- Investment Announcement: OpenAI has announced a significant investment of $110 billion.
- Valuation Context: This investment comes at a pre-money valuation of $730 billion.
- Major Contributors: The funding includes $30 billion from SoftBank, $30 billion from NVIDIA, and $50 billion from Amazon.
- Strategic Implications: This substantial financial backing highlights the growing interest and confidence in AI technologies and OpenAI's potential.
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- Quality Stocks Underperform: In February, the traditionally safe 'Quality' stocks lagged behind 'Value' counterparts by over 5 percentage points, marking the worst performance in five years, indicating a significant loss of investor confidence in high-valuation companies due to AI threats.
- Shift to Fundamental Assets: As concerns over traditional high-valuation companies grow, investors are rotating from 'future-growth' tech stocks to firms with physical infrastructure, such as Coca-Cola, reflecting a preference for assets with lower risks of technological displacement.
- Momentum Trade Warning Signs: Analysts have noted a weak correlation between recent market winners and traditional earnings revisions, leading to warnings for the 'Momentum' trade, as investors focus on companies' defensive capabilities against the AI revolution, giving rise to the 'HALO' trade trend.
- Surge in ETF Inflows: Amid rising uncertainty, ETFs focusing on immediate cash returns, dividends, and buybacks have seen an influx of $7 billion this month, indicating a drastic decline in interest for long-term bets and a shift towards a concentrated AI risk investment strategy.
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- Market Opportunity Outlook: Despite a 'brutal' week, Ives from Wedbush believes that as long as AI companies continue their capital expenditures, this period will be seen as an opportunity for the future, predicting that enterprise and AI spending will dictate stock movements over the next 12-24 months.
- Microsoft Revenue Forecast: Ives highlighted that 10% of Azure customers have embarked on the AI path, which he predicts will generate an incremental revenue of $35 billion to $40 billion for Microsoft, showcasing the company's potential and market demand in the AI sector.
- Nvidia Stock Analysis: Ives referred to Nvidia as a 'stunner,' noting that despite a 9% drop since its earnings report, he expects the stock to be valued between $210 and $215, reflecting a bullish outlook on its future performance.
- Amazon's Increased Attractiveness: Ives stated that Amazon has become 'most attractive' in the past four to five years, emphasizing CEO Andy Jassy's contributions, indicating that the company is enhancing its competitiveness and appeal in the market.
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- Market Decline: The S&P 500 index closed down 0.43% on Friday, with the Dow Jones Industrial Average falling 1.05% and the Nasdaq 100 down 0.30%, reflecting heightened investor concerns over the disruptive potential of AI, which has negatively impacted market confidence.
- Bank Stocks Plummet: The collapse of UK private lender Market Financial Solutions Ltd raised fears of rising defaults, leading to significant declines in bank stocks, with Morgan Stanley and Goldman Sachs both down over 7%, indicating instability within the financial sector.
- Economic Data Impact: The US January PPI rose 0.5% month-over-month, exceeding expectations of 0.3%, while the Chicago PMI unexpectedly increased to 57.7, demonstrating economic resilience, although market speculation regarding Fed rate cuts was dampened.
- Rising Oil Prices Pressure: WTI crude oil prices surged over 2% to a 7-month high due to President Trump's pessimistic remarks on Iranian nuclear negotiations, exacerbating geopolitical risks that could further impact airline profits, leading to declines in related stocks.
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