Motley Fool Money - Microsoft Gets $135 Billion OpenAI Stake

Episode Date: October 29, 2025

Microsoft has agreed to a deal that will allow OpenAI to become a for-profit company, likely paving the way for an IPO. The tech giant’s stake will be worth $135 billion and comes with another $250 billion in cloud computing revenue. We also discuss recent jobs news and the future of AI in transportation and medicine. Travis Hoium, Lou Whitemand, and Rachel Warren discuss: - Microsoft’s $135 billion OpenAI stake - Rolling layoffs in Corporate America - NVIDIA’s deals in robotics, aviation, and medicine Companies discussed: Microsoft (MSFT), Amazon (AMZN), Target (TGT), NVIDIA (NVDA), UPS (UPS). Host: Travis Hoium Guests: Lou Whitemand, Rachel Warren Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Open AI's IPO may be imminent. We'll explain exactly what that means. Molly Fool Money starts now. Welcome to Molly Full Money. I'm Travis Hoy. I'm joined by Lou Whiteman and Rachel Warren. The big news of this week that we have to touch on is Open AI becoming a for-profit company in a deal that was announced on Tuesday. The company is going to be converting to that for-profit. Microsoft is going to have a 27% stake. The OpenAI Foundation has a 26% stake. The rest is going to be owned by employees and investors. So, Lou, this seems like a big thing. This had to happen by the end of the year, according to some of their initial agreements. This also accompanies a huge cloud deal with Microsoft. What is the takeaway here? Is this paving the way

for an IPO? Is this a win or a loss from Microsoft? There's a lot to process here. Yeah, it's a lot to process. And it's opening eye continues to be a confusing structure even with this. But I think this is a win all the way around. Microsoft gets to put a value on its stake, $135 billion, which, you know, for most of us, has a lot of money. For Microsoft, not so much, but it's still, it's good to get that out there. There's at least hope now that Open AI can, like you say, do an IPO or at least have ways to fund all of its massive amount of commitments.

Microsoft gets that $250 billion as their spend commit, but also Open AI can go kind of reach deals with others. I think it works for everyone. Maybe the biggest winner here is Oracle, because Oracle is so dependent on Open AI, even relatives of these other guys. And all of these questions, Travis, you were asking a few weeks ago about how will Open AI actually afford all of these commitments they've made? This is at least the beginning of the answer here. They can afford it because now, like every other company, they can go to market, raise money, do some of the things that just normal companies

do. So, yeah, that's the interesting thing here. If they do end up IPOing, and I think that's kind of the expectation, this sort of... paves the way, whether it's in the next year or it's two years. But Rachel, this does seem to open up a lot of potential opportunities to fund Open AIs ambitions. Those keep getting bigger. Even a huge deal with Microsoft, it's sort of like, where does this, this is still a company that just has, I think, still less than $20 billion in revenue run rate as we're speaking today. So is this the kind of IPO that you're interested in investing in? Is this still a better way to play with some of these other cloud players, like Oracle, like Microsoft.

Where is your head at when it comes to Open AI actually becoming a for-profit? I do think that this is a company that if and when it became publicly traded, there would be a lot of interest. For me personally, seeing how they're able to effectively monetize, a lot of these new products they've released in the recent weeks and months, I think would be really key there. But there's some kind of really important details to focus on here. So they've converted into a for-profit public benefit corporation.

They're now structured as the Open AI. Group PBC. It's under the oversight of the original nonprofit, which is now named the Open AI Foundation. Microsoft's access to Open AI's technology is extended through the early 2030s now. And what's interesting is the new agreement removes previous restrictions on raising capital. It also ends Microsoft's right of first refusal for cloud services, which is important to note. Open AI just completed a share sale that valued around 500 billion. And Microsoft's 135 billion, stake is actually just ahead of the OpenEI non-profits, 130 billion stake in the for-profit company. So this shift really enables OpenEI to behave much more like a conventional tech company and the way

that we think about it, which could, of course, be massive if they enter the public markets. One final thing I'll note, I mean, they have been moving in this direction for a few years now. This isn't something that comes as any surprise to those of us who've been following OpenEI. I think it's the next logical step in their company story. Lou, we got to bring in some of the partnerships that they announced this week, because this is moving markets. PayPal announced that they're going to be a checkout partner for their instant checkout, but basically the shopping on chat GPT. Are these the kind of things where it's both going to be good for some of these existing companies and it's showing how these are going to monetize? It just seems like announcements are really driving the market today rather than actual financial results, which is a little concerning as we sort of dance around this bubble talk.

Well, this goes back to is an investable, too. The opening eye question you asked, too, because look, opening eye before the Microsoft announcement had two real questions they had to answer. How are you going to raise the money and how are you going to turn in profit? I would argue that the more important question is still left unanswered. Maybe they're answering the raise the money, but not the turn in profit. In theory, this is why deals like the PayPal deal are important because, you know, I think the PayPal deal probably means more opening eye than it does to PayPal because PayPal brings credibility. Us normies that want to make sure our money doesn't disappear if we're shopping on chat G, you know, or whatever, one of these

models, we trust the PayPal name. I just don't know if the world needs this. I might use chat GPT to find me a deal and then check out on a website. This whole idea of doing everything on the platform and doing commerce on the platform versus just kind of a replacement for search. We'll see. I still think that's a big hurdle to get there. I think it's as a tool, like look to help with us searching. And then I end up on the Amazon website anyway. It sort of makes more sense to me for now.

But it's a step in the right direction. The other thing I want to look at is what is this stake marked as on Microsoft's balance sheet? Because if it goes up, if it goes down, now those gains and losses are going to have to be marked to market each quarter. So we are going to at least have an idea how Microsoft is value in this company and this stake, now $135 billion or so. So potential for both gains and losses in the future. When we come back, we're going to talk about some job cuts at some big companies in corporate America.

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QINCE.com slash motley for free shipping and 365 day returns. Quince.com slash motley. Welcome back to Motley full money. Another big topic for investors lately has been What's going on with the economy? And one of the concerns over the past couple of weeks has been a number of major layoffs that have been announced. Amazon was rumored to be interested in cutting about 30,000 jobs. I think they actually announced about 14,000 this week. Target had 1,000 or 1,800 layoffs, depending on how you're counting things. But you have UPS, Intel, Nestle, Accenture, Ford.

All of these companies have huge layoffs. this could potentially impact economic spending. We are coming up to the holidays. This is a huge quarter for a lot of companies. So, Rachel, how should we be thinking about this, these changes in the job market, and how it's going to ultimately impact revenue profits and ultimately the stock market? I do think that there is a potential for a significant impact here. And I think we're already kind of starting to see cracks, if you will, in the labor market.

There was a recent report that came out from the pay-broll processor ADP. that had reported a tepid quote-unquote and slow recovery in private sector hiring. There was a different report from the conference board's labor market differential. It showed that fewer consumers believe jobs are plentiful. There was a University of Michigan survey that came out this month that indicates that consumer sentiment remains low as we're seeing persistent inflation and job market concerns. There's been an increase in debt payment delinquencies and inflation has been stubborn. We've also seen really just starting to begin.

and to see the kind of trickle-down impact of the imposed tariffs and how that's putting upward pressure on prices. And so that has a lot of reverberations for a lot of different industries. One thing I will say, I think that there is sort of this drive sometimes to look at these numbers and maybe try to trace it back to past financial crises. Obviously, the 2008 financial crisis is one that is top of mind, I think, for a lot of consumers and investors. I think there are some key differences here. I mean, it's very obviously concerning to see a series of major or layoff announcements. But some of these recent cuts are very closely tied to factors like pandemic era overhiring,

the increased role of automation and artificial intelligence. That's certainly part of it. You know, if you're worried about the state of the economy, I think that we need to keep an eye on the national unemployment rate. You know, some companies might be cutting costs to boost profitability. You know, looking for things like a rise in defaults on consumer loans. There are a few key metrics to keep an eye on right now. I think Rachel's right. There's a lot of different factors going on here with a lot of different

companies. And yes, some of it is more tied to past mistakes than the present. But the point is, it's all happening now. And I think that, you know, as a macro watcher, the, you know, yes, there was maybe a lot of excess capacity in some of these companies, but why are they axing it now? That is what concerns me. Travis, you said, just the potential for this to ripple through the economy and what seems to be a no-hire economy. For a while, we were no-fire, no-hire, where there weren't really layoffs. It was just really hard to find a job if you needed one. If we're moving into a period where there are increasing numbers looking for jobs,

and there's still not enough certainty that companies are looking to hire, things could get a lot worse from here, just in terms of consumer spending and all that. We really need clarity on the corporate side, and I'm worried that's not coming anytime soon, especially with the government shut down, with tariffs, with so many things going on. There's a real potential for things to get worse from here. Lou, I wanted to get your thoughts on just how this could be a snowball rolling down the hill. And I look back at 2008 and the job losses in 2000.

We think of 2008 as a really bad year. But for the stock market, it didn't actually get really bad until third quarter, I think even into the fourth quarter. And then that bled into 2009. The market didn't bottom until March of 2009. But the job losses in 2008 were relatively modest in the first and second quarter, actually improved in the second quarter to 71,000 a month. You know, that would put, we would be a little bit alarmed by that. But by the fourth quarter, it was 510,000 job losses per month.

So it was, you know, somebody gets laid off in the first quarter. They pull back their spending. Revenue for companies starts to go down. They for their cut back a little bit more. Maybe they do some layoffs. It just is the kind of thing that is a self-fulfilling prophecy almost in the wrong circumstances. And then if you find some sort of rot in the economy, we found these credit default swaps and all that stuff in 2008.

Who knows what we'll find if things actually get worse now? So is that the worry is that, you know, this is a couple of announcements, but it's starting to become a trend. And if that trend becomes a snowball, then we've got real problems. Absolutely. And I think you articulated it well. So I'll give you the glass-half full case instead of kind of underlying everything you said. The economy is not the stock market.

And there is at least a case we made that with the stock market now currently high, that we've called it the K-shaped economy recovery where some people are doing very well, but others are not doing well at all. That's not great for society, but it can sustain businesses. If there is a world here where we're cutting, we're becoming more efficient, there is still a critical mass of consumers able to spend, and with interest rates coming down, like some debt costs and costs like that are coming down, where earnings can sustain, even if things are getting worse on Main Street, that could mean for a while, even if things are worse than

Main Street, the stock market can hold. I don't think, again, I don't want to be Chicken Little here. I also don't want to be too dismissive, because, yes, if things continue, on the wrong direction, it will resonate on Wall Street eventually. But for now, I don't think we need to panic into streets as investors. I do worry just kind of, you know, as a consumer, as a citizen, just the societal impact more right now than I do the investing impact. Speaking of potential job cuts and changes to the economy, we're going to talk a little bit about robotics and where AI may be taking us in the future when we come back. You're listening to Motley Fool Money. The old adage goes, it isn't what

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With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. Welcome back to Motley Full Money. This week we saw some massive new. for AI outside of chatbots, which is interesting. Could be really interesting if you're interested in getting a humanoid robot. It also could be really bad for the economy, as Lou talked about with some jobs being displaced.

But Nvidia announced a bunch of different partnerships. A couple that caught my eye with Jobi and Stalantis. But first, I want to talk about the Neo robot. Lou, did you see this one? It's a five-foot-six robot. It will, at least my understanding, at least clean up after my kids. You know, that'd be great if we could actually get somebody to do that, maybe fold the laundry. Maybe we're moving to the point where these are going to be in more and more homes.

With a click of the button or a simple verbal command, Neo transforms into a personal housekeeper. Yeah, wow, who wouldn't want that, right? All for $500 a month on subscription. I don't know what to think of this. My mom used to say, if something sounds too good to be true, dot, dot, dot, dot. But they claim these are coming in 2026. I'm not going to put a deposit down, but wow, we'll see. The Jetsons may be here.

Well, let's get to something that's a little bit more real today for, at least, stock investors. Joby announced a deal or that they were going to be using the Nvidia platform to power some of their AI tools. They've been talking about this for a while, so this isn't necessarily new. There was a new partnership between Stalantis, Uber, Foxcon, Nvidia. Autonomy, autonomous driving, autonomous flying seems like we're really, really reaching an inflection point, and everybody is moving in that direction. Yeah, so Lou the consumer is very excited about the potential. Lou, the investor, I don't think there's anything I can do with this today.

And I'll tell you why. But first of all, Joby and Vidiya, they're working on autonomous flight technology. I hope they get there. I believe they could get there. But I'm not sure I'll still be investing when they get there. You know, everything we've talked about. You don't think that we're going to be able to hop in an EVTOL aircraft at your local heliport and just fly to the next city?

No, no. Autonomously? Yeah, anytime soon? I'm going to take the under on regulation there. There's a boring part of the Joby thing. We're basically using AI for predictive maintenance, which I think makes a lot more sense. That's boring and it's not really going to move the needle.

Everyone's doing this already. But that makes a lot of sense. The idea, I want to see self-driving cars everywhere with no restrictions before we even talk about. You go out and talk on Main Street about how we're going to have just robot planes flying through the air. I don't think that's going over right now. Accidents do seem like less of a problem in the air than it is on the ground. Yes, but no one's afraid of a car crash. Everyone's afraid of a plane crash.

You know, statistics aren't all what matters. Similarly with Stalantis, what they signed was, and I quote, a framework for technology, development, licensing, production, and vehicle procurement. That's corporate speak for we're going to get in a room and brainstorm. And that's great. A lot can come out of brainstorming, but not a lot of concrete. action for now. I love the direction. Everyone's doing exactly what they should be doing. I don't mean to be dismissive of it. I think it's great. I also don't see it as actionable in the foreseeable future.

Yeah, the Nvidia Drive, I did some digging on that. It doesn't seem like they're actually testing level four or level five autonomy today. So it is a lot of frameworks. We're going to develop some stuff, but there's, you know, GM involved, Lucid is involved. So everybody's moving in the right direction, but these are not the companies. Yeah. But these. But these. These are not the companies that have autonomous vehicles on the road today, even on the Uber or Lyft platforms. Those are companies like Waymo, May Mobility. MobileI has partnership with Volkswagen. So there are kind of different levels of advancement here, but at least everybody's moving

in that direction. Rachel, let's turn to the medical space. Eli Lilly is not necessarily the first company I think of when I think of artificial intelligence, but they are at least looking at using AI for some of their development. What are we learning this week? Yeah, this is very exciting. And I think when we talk about AI, you know, we talk so much about the applications we're seeing in the tech space, which are very exciting. But there are so many ways in which AI is revolutionizing healthcare and the way that pharmaceutical drugs are

developed. So Eli Lilly and Invidia have partnered to build what they're calling, quote, the most powerful supercomputer in the pharmaceutical industry. And the core of the collaboration is Nvidia's DJX SuperPod. It's equipped with over a thousand of Nvidia's advanced Blackwell Ultra GPUs. The supercomputer is going to be housed within Lilly's facilities. And it's designed to really revolutionize the entire life cycle from data intake and model training to high volume predictions. This AI factory is essentially going to enable scientists to analyze entire genome

sequences, predict patient outcomes, explore biochemical possibilities and an unprecedented scale. That is so key to to aid and quicken the pace of drug discovery in a way that is efficient and meaningful. One of the things that Eli Lilly's chief AI officer, yes, they do have one of those, noted, was that the company is shifting from using AI merely as a tool to really embracing it as an intelligent partner in the research process. They're even going to be utilizing the NVIDIA-Isaac platform to use intelligent robots to optimize their manufacturing operations. So this is very exciting.

These are very practical applications for AI. And it's part of a larger trend we're seeing. You know, you already have companies like Johnson and Johnson, like Nova Nordisk, that are investing heavily in AI technologies and in many cases working with Nvidia. So it's an area to track if you're interested in AI and the intersectionality with healthcare. We will see where all of this AI development ends up, but definitely a lot going on. And I think by 2030 we're going to see what's real here and what's not. Are chat bots going to be the future or is it going to be airplanes that are flying around by themselves? I'll take the airplane loose. All of the above. As always, people on the program may have

interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy our sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Lou Whiteman, Rachel Warren, Dan Boyd behind the glass and the entire Motley Cool team, I'm Travis Hoyum. Thanks for listening to Motley Cool Money.

We'll see you here tomorrow.