Intriguingly, Microsoft could reset OpenAI’s valuation entirely on its own. If Microsoft believes that $200B+ of cash would be better deployed against the app layer of AI, rather than the—potentially less lucrative—foundational model layer, this would be an opportune time to make a move. The app layer, where AI is used to handle major aspects of business workflows, is a more natural milieu for Microsoft and plays to the company’s distribution strengths.
Microsoft could sell the ~27% ownership it has in OpenAI and pocket over $200B in cash. If Microsoft sees the app layer as the best territory, that cash could help propel efforts on the app layer as well as market leader acquisitions in key verticals like law or coding. Cognition, Harvey, Legora, Rogo, and other vertical specialist AI startups can help Microsoft retrench on the app layer.
But certainly Microsoft can’t just dump OpenAI shares now and not end up losing $100B by moving down the price itself? Not true here. What Microsoft might hope to achieve is getting maximum value for the shares it sells while guiding the price lower after it has exited the cap table. Maximum cash and maximum acceleration away from the foundation labs to the app layer where Microsoft hopes to benefit. The glide down and exit could be accomplished with derivatives, out-of-the-money options, and deep bear bets that Microsoft has insight will pay off. 1 AI share demand is high enough that these options are on the table. There is no tangible obstacle to Microsoft accomplishing this move if it wanted to—even if legally required to hold shares as part of an agreement, it could effectively offload all the economics of ownership via third parties without OpenAI’s consent.
Microsoft might not be the only investor in the AI labs to have an app rotation mindset. Across the cap tables of Anthropic and OpenAI, there are investors and companies like Amazon who would benefit from weaker AI labs and stronger app layers. There would, however, be buyers of Microsoft’s OpenAI shares as there are plenty of investors (SPV amorphous blobs, sovereign wealth, some VCs) that would like to claim to be pre-IPO on the name.
The second-order effects of OpenAI and Anthropic losing half their values would limit the ambitions of the two companies in the short term and leave them unable to chase every vertical. If Microsoft can position in these verticals prior to the move, it’ll benefit from the tide it helped raise. Microsoft’s Azure business is entangled with OpenAI, but Azure can gain share at higher profit margins if a hundred vertical OpenAIs bloom in the wake of this move.
There’s a defensive aspect to Microsoft rug-pulling OpenAI. If Microsoft believes there is a chance an AI bubble bursts, Microsoft would want that to happen in a way that was contained (or deflated rather than popped) as much as possible to the foundation labs. If the narrative becomes ‘AI models are commoditizing,’ establishing that the next chapter is ‘_the value is in the implementation, distribution, and app layer for work’ _is important. That next chapter helps position a lot of other businesses to win alongside Microsoft—and keeps the capex moving.
As we saw with Amazon reporting Anthropic security issues—despite being a major Anthropic shareholder—to the government back in June, ownership is relative. Microsoft’s OpenAI stake is less than 10% of the total value of Microsoft. Microsoft has a gambit to play here, and the app layer rotation would make the sacrifice unsurprising.
Footnotes #
The financial moves to achieve this can be done in relative obscurity without all parties understanding the full picture.
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