Microsoft and Nvidia are racing toward a $4 trillion valuation, both powered by the AI gold rush. While they share a goal, their paths are very different. Nvidia’s valuation is based on its direct role as the primary supplier of AI chips, the essential hardware for the entire industry.
Microsoft’s journey is “fuzzier” and less clear. Its future value hinges on getting customers to pay more for AI tools in its software. This bet is made harder by a breaking alliance with its key partner, OpenAI, and internal setbacks in making its own chips.
These issues leave Microsoft more reliant than ever on Nvidia, its partner and competitor. For Microsoft, navigating this complex dynamic while justifying its soaring valuation leaves no room for error.
From Symbiosis to Open Rivalry: The Microsoft-OpenAI Fracture
The foundational partnership between Microsoft and OpenAI is fracturing under the weight of its own ambition. What was once a symbiotic relationship has devolved into open rivalry.
At the heart of the conflict is a contractual provision known as the “AGI doomsday clause”. This clause could allow OpenAI to severely curtail Microsoft’s access to its future technology once its board determines it has created Artificial General Intelligence.
This has ignited a public and acrimonious dispute. OpenAI executives reportedly believe they are close to this milestone, a claim Microsoft CEO Satya Nadella bluntly dismissed, stating, “us self-claiming some AGI milestone, that’s just nonsensical benchmark hacking.”
The tension is palpable, with one senior Microsoft employee describing OpenAI’s attitude as telling its partner to “give us money and compute and stay out of the way.”
Since a key exclusivity clause expired in early 2025, OpenAI has moved aggressively to a multi-cloud strategy, systematically dismantling its dependence on Microsoft Azure. This strategic pivot includes a landmark cloud deal with chief rival Google.
The AI lab has also forged massive commitments with other providers, including a nearly $16 billion commitment with specialized provider CoreWeave and a recent expansion of its Stargate data center project with Oracle.
This push for autonomy now includes direct business competition. OpenAI recently secured a DoD contract worth up to $200 million, encroaching on a sector Microsoft has long dominated. It is also building an “Enterprise Solutions” team that directly competes with Azure AI services.
The Stumbling Race for Silicon Independence
Compounding Microsoft’s partnership woes are significant internal stumbles in its own hardware ambitions. The company’s effort to develop in-house AI chips, a key strategy to reduce its costly dependence on Nvidia, has fallen dangerously behind schedule.
Microsoft’s next-generation custom chip, codenamed ‘Braga,’ has been delayed until at least 2026. More critically, sources claim the chip will fall well short of the performance of Nvidia’s current Blackwell processors.
This setback puts Microsoft on the back foot as rivals like Amazon and Apple accelerate their own custom silicon plans. The delay cedes more ground to Nvidia, whose CEO Jensen Huang questioned the logic of such projects, asking, “What’s the point of building an ASIC if it’s not going to be better than the one you can buy?”
While Microsoft stumbles, Nvidia is only picking up speed. CEO Jensen Huang recently described the rollout of its Blackwell platform as “the fastest product ramp in our company’s history.”
With its next-generation ‘Vera Rubin’ architecture already planned for 2026, Nvidia threatens to be two generations ahead by the time Braga is available.
A New Cloud Order: The Rise of the AI Supermarkets
The insatiable demand for AI compute is reshaping the cloud market, creating openings for new challengers. The era of a simple AWS and Azure duopoly is giving way to a more dynamic, multi-polar landscape where performance and availability are paramount.
Oracle has capitalized on this shift, re-emerging as a top-tier provider. By positioning itself as a neutral “AI supermarket,” it is winning massive deals from customers who want flexibility. As Oracle Cloud SVP Karan Batta explained, “Our goal here is to make sure that we can provide a portfolio of models – we don’t have our own.”
Simultaneously, specialized providers like CoreWeave are gaining a critical first-mover advantage. The company was the first to deploy Nvidia’s latest and most powerful GB300 NVL72 systems. This gives its customers access to unparalleled computing power, prompting CEO Michael Intrator to declare, “The future runs on CoreWeave.”
This AI arms race is incredibly capital-intensive. CoreWeave’s journey from its March 2025 IPO to a subsequent $2 billion debt offering highlights the immense resources required. CoreWeave’s rapid, debt-fueled growth has led some analysts to be cautious. DA Davidson’s Gil Luria warned, “investors regretted scaling WeWork, and they may not want to scale this business [CoreWeave].”
This new reality has created a complex web of alliances. Even Google was reportedly in talks to lease GPU capacity from CoreWeave to supplement its own needs. The market is now a frantic scramble for cutting-edge hardware, transcending traditional competitive boundaries.
While Nvidia’s primary risk is a potential cooling of AI demand, Microsoft faces a more complex array of threats. Its path to sustaining a $4 trillion valuation requires it to successfully commercialize AI services, resolve its partnership conflicts, and catch up in the hardware race.
As rivals like AMD’s CEO Lisa Su have noted, “This is the beginning, not the end of the AI race.” For Microsoft, the clock is ticking.
