President Trump announced on Wednesday the ‘Stargate’ initiative, focused on expanding artificial intelligence (AI) infrastructure in the US. Stargate is currently backed by SoftBank (SFTBY), Oracle (ORCL), and ChatGPT maker OpenAI. Microsoft, a key backer of OpenAI, was listed as a technology partner in the new joint venture. On Tuesday, Microsoft announced that its partnership with OpenAI has evolved so that Microsoft is no longer the sole cloud provider for OpenAI.
While some investors may be concerned the change in the agreement may be bad news for Microsoft, WestEnd Capital Management senior equity analyst Ali Mogharabi tells Market Domination co-hosts Julie Hyman and Josh Lipton that the Stargate announcement is “more of a win” for Microsoft in the long run.
The exclusivity change “lessens [Microsoft’s] dependency on the OpenAI [large language models] LLMs … which basically means that they can provide a variety of options for their enterprise clients that are on Azure,” Mogharabi explains.
“That’s the way we should think about Microsoft when it comes to AI: how well Azure and the Azure revenues are actually benefiting from all of that,” he says. “Overall, I think in the long run, we’ll see that that was pretty much a net positive for Microsoft.”
Ahead of Microsoft’s earnings report next Wednesday, Mogharabi says he’s looking for more color about how the company is monetizing AI in its apps and AI agent initiatives.
He explains, “While the AI initiatives have actually resulted in continuing cloud revenue growth, we’d like to see more clarity on the app monetization side … [such as] the usage and frequency of those AI features that they’ve added.”
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This post was written by Naomi Buchanan.
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