OpenAI, the creators of ChatGPT, isn’t a tradable stock on the market. While there are rumors swirling about when it could have an initial public offering (IPO), there’s no great way to invest in the stock outside of private-party sales.
However, I think there’s a far greater way to gain exposure to OpenAI and the success of ChatGPT: Microsoft (MSFT 0.60%), which has been a key OpenAI partner along the way and has built a significant stake in the company. I think it’s the best way to invest in OpenAI pre-IPO and could give investors a shot at one of the most exciting private companies in recent history.
Image source: Getty Images.
Microsoft owns a huge chunk of OpenAI
Microsoft and OpenAI were in a legal dispute to determine how much of OpenAI Microsoft actually owned. At the end of the OpenAI restructuring, it was determined that Microsoft owns about 27% of OpenAI. That’s a huge chunk of the business, especially if it goes public based on its most recent funding round.
At the end of March, it had raised $122 billion, valuing the company at around $852 billion. That means that Microsoft’s investment is worth about $230 billion. Microsoft currently has a market cap of $2.8 trillion, so nearly 10% of its total value as a company is its stake in OpenAI.
However, Microsoft can’t really do anything with this ownership because OpenAI isn’t profitable and hasn’t gone public yet. But that could be changing.
Today’s Change
(-0.60%) $-2.25
Current Price
$370.82
Key Data Points
Market Cap
$2.8T
Day’s Range
$370.03 – $375.63
52wk Range
$355.67 – $555.45
Volume
1.1M
Avg Vol
37M
Gross Margin
68.59%
Dividend Yield
0.94%
This could be OpenAI’s last private funding round, since obtaining more than $100 billion in capital in the private markets is no easy feat. Raising that level of capital really needs to be done on public markets, and OpenAI may be forced to go public soon as a result.
When that could be is anyone’s guess, but I think it will likely come later this year or into next year. OpenAI has huge plans to continue expanding its infrastructure, and it will need more capital to do that. Because of Microsoft’s sizable ownership stake, you’re exposed to OpenAI by owning Microsoft stock.
Fortunately for investors, Microsoft is a screaming deal right now. It trades at nearly a decade-low operating price-to-earnings ratio.
MSFT Operating PE Ratio, data by YCharts.
This metric doesn’t include any gains from its OpenAI investment, so the core Microsoft business is being valued at a historically cheap price tag. This basically means you can buy it at a low price and get the OpenAI investment portion for free.
That’s a screaming deal, and investors shouldn’t wait on this once-in-a-decade offer; now is the perfect time to buy shares.
