Microsoft Faces Legal Storm and Regulatory Scrutiny Amid Political Support

Microsoft finds itself navigating a complex landscape of high-stakes legal challenges and regulatory investigations. While the tech giant recently secured notable political backing, it must simultaneously contend with a massive lawsuit from Elon Musk and a probe by Italian authorities into its gaming subsidiary.

Trump’s Public Endorsement Eases Regulatory Path

In a significant development for the company’s infrastructure plans, Microsoft received public praise from former U.S. President Donald Trump. The endorsement came via Truth Social, where Trump posted, “Congratulations to Microsoft. More to come soon.” This followed a key agreement secured by Microsoft with the U.S. government on January 12 and 13.

Under this agreement, the corporation committed to bearing the substantial electricity costs for its AI data centers internally, including expenses for necessary grid expansions. This arrangement explicitly prevents these costs from being passed on to consumers. Analysts view this commitment and the subsequent political recognition as mitigating a major regulatory overhang, effectively signaling government approval for Microsoft’s AI infrastructure expansion under these financial terms.

Musk Launches Monumental $134 Billion Lawsuit

The political support arrives as a counterweight to a severe legal challenge. On Friday, January 16, Elon Musk escalated his disputes with the company by filing a new lawsuit. The legal action seeks up to $134 billion in what it describes as “ill-gotten gains” from both OpenAI and Microsoft.

The core allegation is that Microsoft profited from Musk’s early contributions to OpenAI without providing fair compensation. Legal representatives for Musk have quantified Microsoft’s alleged share of these profits at between $13.3 billion and $25.1 billion. With the trial set to commence in April, the stage is set for a potentially protracted legal battle, a factor investors are now weighing.

Should investors sell immediately? Or is it worth buying Microsoft?

Italian Watchdog Examines Mobile Gaming Practices

Adding to the company’s challenges, Italy’s competition authority, AGCM, has opened an investigation into Microsoft’s subsidiary, Activision Blizzard. The probe focuses on the mobile games Diablo Immortal and Call of Duty: Mobile.

Regulators are examining whether the company employed misleading and aggressive sales tactics that encourage excessive in-game purchases, particularly among minors. The investigation will assess if default settings for parental controls and time-limited purchase offers violate consumer protection laws. Potential outcomes extend beyond financial penalties to include mandated changes to the monetization models of these major revenue-generating titles.

Executive Stock Sales Follow Pre-Arranged Plans

Recent securities filings revealing stock sales by top executives sparked initial market discussion. CEO Satya Nadella disposed of shares worth approximately $75.3 million, while President Bradford L. Smith sold around $20 million worth.

However, these transactions were executed under a pre-defined 10b5-1 trading plan established on March 7, 2025. Such plans allow corporate insiders to schedule stock sales well in advance, insulating them from accusations of trading on non-public information. These sales are therefore considered routine administrative actions rather than a reaction to recent company developments.

Market Awaits Quarterly Earnings for Clarity

Microsoft shares closed at $459.86 on Friday, trading roughly 17% below their 52-week peak. All eyes now turn to the quarterly earnings report scheduled for January 28. The investment community seeks clarity on a pivotal issue: whether burgeoning AI revenue streams can offset the company’s substantial capital investments and newly elevated legal risks. The coming days will reveal if the political backing from Trump can counterbalance the market uncertainty introduced by Musk’s colossal financial demand.