Microsoft’s AI Folly: A Most Curious Investment

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The esteemed Microsoft, a corporation that once ruled the digital roost with an iron fist and a monotonous operating system, finds itself in a most peculiar predicament. The quarterly pronouncements, those carefully constructed edifices of optimism, have begun to tremble. Investors, those fickle creatures, have finally noticed the emperor’s new algorithms are rather threadbare. A heavy reliance on the whims of a certain OpenAI, a prodigious appetite for silicon, and a distinct lack of enthusiasm for Microsoft’s own creations – it’s a combination that even a seasoned gambler would view with suspicion.

The OpenAI Dependency: A Most Uncomfortable Embrace

A Most Telling Statistic

Microsoft 365 Copilot, the company’s attempt to embed artificial intelligence into its productivity suite, has attracted a mere 15 million paying customers. A respectable number, perhaps, if one ignores the fact that Microsoft 365 boasts a staggering 450 million users. A penetration rate of barely 3%. It appears the masses are not yet clamoring for AI assistance with their spreadsheets and presentations. A most curious observation, wouldn’t you agree?

GitHub Copilot, an AI tool designed to aid programmers, fares little better, with 4.7 million subscribers. A 75% increase year-over-year, to be sure, but from a decidedly modest base. Given GitHub’s 150 million users, the adoption rate remains stubbornly low.

If Microsoft, a corporation with unparalleled reach and influence, struggles to convince its customers to embrace AI, one can only imagine the challenges facing the rest of the industry. It’s not that these tools are useless; it’s that the current level of investment in infrastructure and training may be wildly disproportionate to actual demand. A digital gold rush, perhaps, built on foundations of sand?

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Should One Part with One’s Capital? A Most Delicate Question

Microsoft, it must be acknowledged, is not solely reliant on cloud computing and AI infrastructure. The company possesses a portfolio of software franchises that remain industry standards and reliable sources of revenue. Windows continues to dominate the PC market, and Office productivity apps show no signs of fading into obscurity. A solid foundation, certainly.

However, the relentless spending on AI infrastructure is beginning to exert pressure on the company’s cash flow. Free cash flow declined in the most recent quarter, a consequence of soaring capital expenditures. This spending must, eventually, generate a reasonable return on investment. Investors, understandably, are growing skeptical.

The stock currently trades at around 25 times the average analyst estimate for fiscal 2026 earnings. A valuation that is, shall we say, optimistic. Whether it is justified will depend, in large measure, on how Microsoft’s relationship with OpenAI unfolds.

As for myself, I shall remain on the sidelines. The OpenAI-related risk, coupled with the prevailing market exuberance, makes this stock decidedly unappealing. One prefers to invest in enterprises that offer a modicum of predictability, rather than gambling on the whims of artificial intelligence. After all, a wise man knows when to hold his horses, and an even wiser man knows when to simply walk away.

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2026-01-31 15:12