Microsoft (NASDAQ:MSFT) is in hot water. The FTC has just opened a broad antitrust investigation targeting its cloud computing, software licensing, artificial intelligence (AI) and cybersecurity businesses. Critics including Google and Salesforce (NYSE:CRM), accused Microsoft of bundling products like Office 365 and Teams with Azure, making it nearly impossible for customers to leave without facing exorbitant costs. The move comes as FTC Chair Lina Khan steps up pressure on big tech, aiming to curb what she sees as monopolistic behavior. Microsoft, which has invested billions in expanding its global footprint in cloud and AI, now faces questions about how those investments could harm innovation and competition.
Complaints against Microsoft are piling up. Google (NASDAQ:GOOG) went so far as to file a formal complaint with the European Commission, accusing the Redmond-based giant of locking customers into its cloud ecosystem with punitive licensing terms. Meanwhile, in the US, the FTC is carefully examining whether Microsoft’s dominance in AI, fueled by its partnership with OpenAI, gives it an unfair advantage. Add in cybersecurity concerns, like a recent massive outage affecting Microsoft systems globally, and the stakes couldn’t be higher. Microsoft has long benefited from its role as a leading government contractor, but this investigation could change its trajectory in the booming cloud and AI markets.
And here’s the wild card: politics. President-elect Trump is set to take office in January, and while his administration has always been tough on big tech, Microsoft has had its share of victories under his leadership—remember that $10 billion deal with the Pentagon? But with Lina Khan gone, there is no guarantee that this investigation will survive a management shake-up. For investors, the main takeaway is this: Microsoft’s future in its most profitable sectors suddenly looks uncertain. And in a market as fierce as technology, uncertainty is never good for business.
This article first appeared on GuruFocus.