It’s been a tough year for software stocks and hyperscalers. Software investors are now worried about the disruption AI model companies could cause, while hyperscalers are selling off after forecasting massive spending plans to build out AI infrastructure.
Count Microsoft(NASDAQ:MSFT) Both are the same. Microsoft’s stock is down 30% from its all-time high set in July, although some other well-known software stocks and hyperscalers have sold off more sharply. This is significant bear market action, consistent with the sickening sell-off Microsoft experienced in 2022, and even more surprising considering Microsoft is considered one of the “safest” stocks on the market.
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Will Microsoft shareholders be encouraged or reassured by what’s coming? One insider thinks so, and just made a $2 million bet that the future will be better.
On February 18, Microsoft Director John W. Stanton purchased approximately $2 million worth of stock, purchasing 5,000 shares at an average price of $397 per share. The open market purchase increased Stanton’s stock holdings by 6.1%.
That may not sound like much, but $2 million is definitely not a small amount. It’s especially interesting that Stanton went to great lengths to buy more stock because as a Microsoft director he already received about $250,000 in stock awards as part of his annual compensation.
Stanton has been a Microsoft director since 2014 and is currently a partner at a large private equity fund. He previously served as a telecommunications industry executive. He’s clearly very familiar with the business and clearly confident that Microsoft will get through this unscathed.
One of Microsoft’s advantages is its approximately 27% stake in OpenAI. Meanwhile, in November, Microsoft announced it would invest “up to” $5 billion in OpenAI competitor Anthropic. So assuming Microsoft is forced to pay taxes to these two leading large language models (LLMs) to incorporate into its Office or Dynamics software, Microsoft is somewhat “hedged” by its partial ownership of both companies.
Additionally, both OpenAI and Anthropic have committed to massive computing on Microsoft’s Azure cloud as part of these investment deals. In its deal announcement, Anthropic committed to investing at least $30 billion in computing on Azure over the next few years. OpenAI has committed up to $280 billion to Azure in the short to medium term.
So Microsoft is hedging in a number of ways. If these LL.M.s develop software that competes with Microsoft, Microsoft will still retain a portion of the profits while also becoming the winner’s cloud provider. What’s more likely is that these LL.M.s may work with Microsoft, licensing their software and integrating it with Microsoft, rather than building a competitor, given the company’s massive Microsoft Office 365 customer base.
However, Microsoft is also pursuing a third option, which could preserve its software franchise profits to a greater extent.
Image source: Getty Images.
Unlike nearly every other software vendor, Microsoft is also building its own AI model specifically to serve its software franchise. In August 2025, Microsoft launched the MAI-1 expert hybrid model, which actually has multiple model variants for different use cases. Microsoft said in a press release: “[D]Different user intents and use cases will unlock huge value. In the near future, this team will make more contributions in both areas. “
Then in January, Microsoft launched the Maia 200 AI inference chip, claiming that the chip outperformed other cloud vendors’ in-house designed chips in both TFLOPS and HBM capacity.
As a result, Microsoft is also pursuing vertical integration in artificial intelligence, possibly with the goal of serving its software with its own models. This is undoubtedly the most profitable way, as it will cut into the profits Microsoft pays to OpenAI or Anthropic.
Given that Microsoft has three paths to success in the AI era, namely through its ownership of OpenAI and Anthropic, its position as a cloud provider for these LLMs, and its pursuit of building its own custom models at least partially on its own hardware, Microsoft’s exposure is much less risky than other software companies whose profits may be squeezed in the AI era.
Given that the stock’s price-to-earnings ratio has fallen to its lowest level in nearly a decade, it’s no wonder Stanton might see an opportunity.
The only real risk is if some non-OpenAI or Anthropic LL.M. (perhaps Google Gemini) achieves some kind of breakthrough that enables it to dominate the market in a monopolistic manner. But as things stand, it seems unlikely that this market will become a winner-takes-all market anytime soon.
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Billy Duberstein and/or his clients work at Microsoft. The Motley Fool has positions and recommendations for Microsoft. The Motley Fool has a disclosure policy.
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