MSFT Stock Moves From Darling fo Dud

• OpenAI's high valuation raises questions about its expedience and future supremacy.
• Microsoft’s massive investment in OpenAI is dangerous as challenger, including Elon Musk's XAI, join the field.
• Microsoft's stock lags, with confusion about AI's near-term aftermath and OpenAI’s possible to deliver.
• Read more: Unlock the keys to a rich retirement .

https://videos.247wallst.com/247wallst.com/2024/10/MSFT-Stock-Moves-From-Darling-To-Dud.mp4

OpenAI.

You know, a lot of people put it in first place among the AI companies.

A hundred and fifty-seven billion dollar valuation based on the last round.

Yeah, Microsoft (NASDAQ: MSFT) has a big position in this.

They've invested a total of thirteen billion in it.

The most well-known tranche was the one that was ten billion dollars that they put in.

I read today there's tension between Microsoft and OpenAI about Microsoft not getting enough access to energy for server farms.

It's a rumor.

But you're going to hear a lot more of this as there's a battle for energy.

But Microsoft's stock is now underperforming for the year.

And one of the reasons is, well, there are two reasons.

The first one is that people don't think AI is going to pay off like a slot machine tomorrow, which a lot of people thought it would.

The other thing, though, is that there's no guarantee that OpenAI is going to be the winner.

Or there may be two or three winners, which means that OpenAI is never going to be the walk-off home run people thought of.

Absolutely.

And again, as we know, so very, very well in technology, there's always somebody who worked at OpenAI that will go start their own company.

And, you know, they may build a better mousetrap, and that's inevitably what happens in big tech.

And while they do have a good head start, and, you know, Altman and everybody involved is super smart.

They're always the smartest guys in the room, but again, how does the payoff come in for Microsoft?

I mean, you're more likely to get a better payoff with AI and an Apple (NASDAQ: AAPL) iPhone than what Microsoft can pay off.

Well, I don't like the idea of...

It's good for Microsoft's balance sheet to own the thing.

That's sort of like a Warren Buffett argument: the guy owns it, they own it, so it's worth something.

But to me, the thing that I worry about is the fact that Elon Musk is in this business, okay?

And he's willing to devote as much money as he can.

He has a company called XAI.

They have built what they claim is the largest AI installation in the world.

That's right. In Tennessee.

And they have people teaching the AI out there.

I mean, you know, as you know, Musk can build rockets and cars and, you know, move your hands around with a brain implant.

I would not want to be up against him.

And it certainly means that, you know, what they call the moat at business schools here, it's not a wide moat.

You've got some people jumping into it.

And one hundred and fifty-seven billion dollars is a high valuation.

Microsoft has to show some delivery on this with, you know, its Azure and its other AI-based technologies, or they're going to look dumb.

Yeah, and again, OpenAI really doesn't make any money.

They have a product and all that.

And yeah, you can pay for a chat version that is better and does more.

But they don't make any money.

And if you combine the likely scenario that more come into the game, like you said, and especially Musk, who is not only interested in that, but he's interested in a search engine as well that doesn't censor things.

So if he gets involved in this, you're exactly right. It could be really, it could change the whole game.

I have to tell you, my view of this is that Microsoft was incredibly stupid to put this much money into it, particularly given that it's not a moneymaker.

It does not have a good moat.

Microsoft, I think, believed they needed to catch up in this area, and they threw money at it.

But the market is now looking at this and saying, we don't like this. They put in too much money.

There's not enough money in the near term future from this, and therefore, its stock is performing poorly.

Yeah, it is going to be interesting.

And, you know, it never ceases to amaze me, and we've had this discussion, is if people would stick, you know, Microsoft made such huge gains with Azure, and, you know, everything was working perfectly.

It's like, stay on your game, stay on your game.

Oh, no, no, no. There's more that we can do.

When Azure and the other products, you know, operating system products and software, are what is the bread and butter for them.

Well, I think that within the next year or so, it's going to be clear that there are two or three winners in this sector.

And if OpenAI isn't at the very top of that list, this valuation is going to look super rich to people.

And again, I think there's going to be egg on Microsoft's face.

So look, if I'm looking at this stock right now, I don't view this as a good buy.

I just don't view it as a...

There's no strong case to be made that Microsoft is an elite tech stock right now.

No, not really.

And that's a real, real shift from how things were just as little as a year ago when they were just rolling.

And yeah, things have kind of come to a standstill.

And it'll be interesting to see how third quarter numbers are.