Microsoft (MSFT +0.70%) has been a massive investment success over the past few years. Anybody who has bought Microsoft stock has been the beneficiary of several key trends in the tech industry, primarily cloud computing and artificial intelligence (AI). However, Microsoft's AI strategy is a bit different than most of its peers. Instead of building its own generative AI model internally like Alphabet or Meta Platforms, it chose to partner with OpenAI, the maker of ChatGPT.
While this relationship got a bit messy at times, Microsoft has a significant financial interest in OpenAI's success. I think this could be a top reason to buy Microsoft stock in 2026, as it bolsters the rest of the investment case.
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Microsoft's stake in OpenAI is worth around $203 billion
After a lot of negotiation in determining exactly how much of OpenAI Microsoft owns, the lawyers came to the conclusion that Microsoft owned about a 27% stake in OpenAI. That's a huge chunk, and it could be worth a ton based on OpenAI's latest valuation target. In December, OpenAI was targeting a $750 billion valuation to raise more money to operate the business. If that figure turns out to be accurate, then Microsoft's stake is worth around $203 billion.
That's a huge investment, so seeing OpenAI succeed is a huge point for Microsoft. As a result, it has integrated OpenAI's ChatGPT into its Copilot product lineup, which helps users integrate generative AI features across Office products, as well as other business software Microsoft produces. However, Microsoft isn't betting the house on ChatGPT.
In its Azure AI Factory, it offers multiple generative AI models outside of ChatGPT. Developers can select from alternative models like Grok from xAI, Meta's open language model Llama, Anthropic's Claude, and many others. This neutral strategy of offering many types of models so developers can choose which one fits their needs most has been a great strategy for Microsoft. It's one of the primary reasons why Microsoft's cloud computing division has dramatically outpaced Amazon's and Google's.
In the first quarter of Microsoft's fiscal 2026 (ended Sept. 30), Azure's revenue rose a jaw-dropping 40% year over year. For comparison, Google Cloud, a smaller entity that should be able to grow faster, was up 34% year over year. AWS also had a strong quarter compared to recent results, but its revenue only rose 20%.
NASDAQ: MSFT
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The difference? Amazon and Google are pushing their own solutions while Microsoft offers a wide variety. While this may be more profitable for Google and Amazon in the end, from a revenue growth standpoint, Azure is winning. Furthermore, ChatGPT is still seen as the go-to generative AI model, so Microsoft is seeing a dual benefit by being one of the primary hosts for ChatGPT and being invested in it. But does that translate into Microsoft's stock being a buy?
Microsoft's stock isn't the cheapest around
Microsoft trades for about 29 times forward earnings, which is pretty standard for most big tech companies nowadays. With its valuation at the expected level, that means most of its stock performance will likely come from its business growth. For fiscal 2026 (ending June 30), Wall Street analysts expect 16% revenue growth. For fiscal 2027, they expect 15%.
That's a solid growth rate for a big tech company like Microsoft, and I would expect its stock price to rise a similar amount over that time frame. The long-term average performance of the S&P 500 is about 10% per year, so if Microsoft can maintain its valuation and achieve its expected growth rate, it will be a successful investment over the long term.
If OpenAI goes public, it will bolster its investment case even further because now Microsoft has a $203 billion investment that it can convert to cash fairly easily to use for activities like constructing data centers. That could be a huge advantage in the AI arms race, and Microsoft looks like a great stock to buy for 2026 as a result.
