Microsoft Stock Nears Death Cross as OpenAI Partnership Weakens

Microsoft is facing increasing pressure as its stock nears a technical pattern known as the "Death Cross," signaling potential bearish momentum. This, combined with growing strains in its partnership with OpenAI, has left some investors questioning whether now is the time to lock in gains.

Technical Indicators Flash Bearish Signals

In 2024, Microsoft has enjoyed a solid performance, with the stock up 11.38% year-to-date and 25.21% over the past year. However, recent technical indicators suggest that this upward momentum may be fading. Microsoft stock is on the verge of forming a Death Cross, where the 50-day moving average dips below the 200-day moving average, signaling a possible transition from bullish to bearish momentum.

Moving Averages Under Pressure

Currently, Microsoft stock is trading below several key moving averages, adding to concerns about mounting selling pressure:

• 8-day SMA: $418.47 (Bearish)

• 20-day SMA: $426.29 (Bearish)

• 50-day SMA: $417.82 (Bearish)

• 200-day SMA: $416.98 (Bearish)

At its current share price of $409.50, Microsoft is already under bearish pressure. If the Death Cross materializes, it could confirm a deeper downtrend, amplifying concerns for investors.

Strains in the OpenAI Partnership

Adding to Microsoft's challenges is its weakening relationship with OpenAI. Recent reports suggest that OpenAI, which has long relied on Microsoft for cloud services, is seeking more independence. The AI company recently shifted part of its operations to Oracle, leasing a large data center in Texas. This move follows OpenAI's $6.6 billion funding round, which is fueling its expansion efforts.

While OpenAI maintains that its partnership with Microsoft remains strong, its decision to explore alternative cloud providers points to dissatisfaction with Microsoft's ability to meet its growing demand for computing power.

Weakened Cloud Business Outlook

OpenAI’s pivot to Oracle presents potential risks for Microsoft’s cloud services business. The evolving relationship could impact Microsoft's revenue from this high-profile partnership, further adding to the bearish outlook for the company's stock performance.

Time To Lock In Gains?

As Microsoft's stock edges closer to a Death Cross and its partnership with OpenAI shows signs of strain, investors may need to reassess their positions. The combination of bearish technical indicators and uncertainty around its cloud business partnerships could be signaling a downturn.

For investors who have benefited from Microsoft’s strong 2024 performance, this could be a pivotal moment to consider locking in gains before the Death Cross becomes a reality.