Key Highlights

● Microsoft closed Friday at $535.07, up $12.46, as the Dow climbed 423.31 points to 51,654.95.

● No single company announcement drove the move as a broad rebound in software stocks followed Thursday's rough session.

● Microsoft is OpenAI's largest backer and a major provider of the Cloud Computing power that runs its models.

● Technology sector funds took in $4.53 billion in the latest week while US Equity funds saw $5.11 billion of outflows.

Microsoft (NASDAQ:MSFT) closed Friday at $535.07, up $12.46, one of the larger point gains among Dow Jones Industrial Average members on a day when the index climbed 423.31 points to 51,654.95. No single company announcement drove the move. Rather, Microsoft was carried by a broad rebound in software stocks after a rough Thursday, when it had slipped along with much of the technology sector.

Software was the standout group of the session. The iShares Expanded Tech-Software ETF, known as IGV, jumped, and a Cybersecurity ETF did even better. Oracle (NYSE:ORCL) rebounded $6.21 to $141.40, Palantir (NASDAQ:PLTR) rose to $209.05, a record close according to market data, and Datadog (NASDAQ:DDOG), Palo Alto Networks (NASDAQ:PANW) and CrowdStrike (NASDAQ:CRWD) all rallied.

The OpenAI question

Microsoft has a particularly close connection to the story that rattled markets on Thursday. The company is OpenAI's largest backer and a major provider of the cloud computing power that runs its models. A media report said that OpenAI's annualized Revenue was about $50 billion at the end of September, roughly $20 billion below the figures of around $68 billion to $70 billion that had circulated earlier. Those higher numbers appear to have included gross or partner revenue.

The report triggered a sell-off across AI-linked stocks on Thursday. On Friday, sentiment improved after a separate media report said OpenAI expects to reach or exceed $70 billion in annualized revenue by year-end. Software names bounced hardest, while chipmakers such as Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) slipped, a split that one weekly review summed up as Leadership moving out of the AI trade.

Why software rebounded faster

Microsoft earns money across several businesses: its Azure cloud platform, Office and Microsoft 365 productivity software, Windows, LinkedIn, gaming and more. That diversity can make it less exposed than pure-play chipmakers to swings in AI hardware spending. Investors who sold software on Thursday appeared to view the OpenAI report as less damaging to companies that sell subscriptions and services to a wide base of corporate customers.

Fund-flow data showed technology still attracting money even as investors pulled back from stocks overall. Technology sector funds took in $4.53 billion in the latest week, while US equity funds overall saw $5.11 billion of outflows, according to market data.

The broader market

The S&P 500 rose 46.18 points to 7,811.54, finishing about 7 points below its record close set on Tuesday. The Nasdaq Composite gained 172.83 points to 27,366.17 for its fourth straight weekly gain, and the Nasdaq-100 added 157.34 points to 30,883.15. The Dow logged its biggest weekly gain since the week ended August 7.

The macro picture remains a challenge for richly valued growth stocks. The 10-year Treasury Yield held near a 24-year high, and Fed Governor Christopher Waller said Thursday he anticipates additional hikes to bring Inflation back to the Fed's goal. "The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time," he said. Consumer sentiment also slipped to a five-month low of 46.3.

Baird's Ross Mayfield said the market had been swinging with sentiment around Iran. "That's why it's a fairly tepid rally," he said.

OpenAI Reporting and Consumer Price Data Are the Next Tests for Microsoft

US stocks trade Monday, Columbus Day, while the Bond Market is closed. September consumer prices are due Wednesday, October 14, and could shape expectations for the Fed's October 27 to 28 meeting. Big-bank earnings, running October 13 to 16, will also offer clues on corporate technology spending. Any further reporting on OpenAI's finances will matter for Microsoft given their close partnership.