OpenAI’s confidential IPO filing was expected to benefit its main partners, but the market reacted differently. Oracle’s stock dropped about 2.2%, and Microsoft’s fell 5.1% by midday Tuesday. This shows that the two companies have very different stakes in OpenAI’s public debut. Here’s why Oracle needs the IPO to go well, and why Microsoft’s situation is more complex.
Oracle’s partnership with OpenAI is a key part of its shift to cloud services. Oracle has a $300 billion contract to build AI data centers for OpenAI through 2030, making up more than half of its $553 billion cloud computing backlog. This backlog supports Larry Ellison’s move from software to AI infrastructure. If OpenAI’s IPO goes smoothly and the company shows it can meet its financial promises, Oracle’s future revenue looks more secure. But if the IPO struggles or OpenAI shows signs of financial trouble, Oracle’s biggest contract could be at risk. Investors will learn more about how Oracle’s management sees this risk when the company reports earnings after Wednesday’s close.
Microsoft’s position is different and more complex. Before OpenAI’s latest funding round, Microsoft owned about 27% of the company, but their partnership has changed recently. Microsoft can still license OpenAI’s models and products until 2032, but it no longer has exclusive rights, and OpenAI is not limited to using Microsoft as its only cloud provider. These changes mean Microsoft has less to gain from an OpenAI IPO, but it still faces the same risks. Over the past year, Microsoft’s stock has dropped 13% as investors worry that OpenAI and Anthropic could disrupt its software business. The IPO filing does not address these concerns.
OpenAI also works closely with CoreWeave, Advanced Micro Devices, and Broadcom for cloud and chip needs. This means the financial impact of the IPO will reach far beyond just Oracle and Microsoft.
