Among the mega tech stocks, Microsoft (NASDAQ: MSFT) has been unable to get on track this year. After a promising start, fueled by what was considered a top position in the AI industry, it has sold down sharply. It has risen 12% for the year compared to an advance of 26% by the S&P 500. A new federal government investigation into whether Microsoft has violated antitrust laws could push it down even more.
Several media outlets say the U.S. Federal Trade Commission will investigate Microsoft’s licensing business, particularly its effort to keep customers on its Azure cloud platform. Cloud computing has been vital to Microsoft’s growth in recent years. It is the No.2 cloud computing firm based on revenue, behind only Amazon.com (NASDAQ: AMZN).
According to Bloomberg, the investigation is well underway. The software company has already been sent a long list of questions. The news agency said a particular target is Micosoft’s AI operations. Microsoft is a large investor in OpenAI, the leading privately held AI company.’
Microsoft investors need to be worried that the invention will trigger government action to ask courts for specific actions. Alphabet (NASDAQ: GOOG) was recently found guilty of anti-competitive practices. Federal officials ask that it divest itself of Chrome, its popular browser. Chrome has two-thirds of the world’s browser market.
This will not be the first time Microsoft has faced a government antitrust action. In 2000, it lost a federal case, and the company was to be broken apart. One segment would have owned the Microsoft OS products. The other would have operated its tools, including Word, email operations, and PowerPoint. A last-minute negotiation kept Microsoft largely intact.
If the new investigation persists, Microsoft’s new problem could take years to resolve. An initial court decision could be appealed, and the Trump Administration could decide to drop the FTC plan completely.
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