Microsoft is betting its future on cloud gaming — but that’s what tripped up the Activision deal
Microsoft has invested huge amounts of capital and time into making cloud gaming a core part of its gaming offering.
Peter Summers | Getty Images
When Microsoft announced its offer to buy Activision Blizzard for $68.7 billion, it marked one of the biggest acquisitions in video game history — and the largest-ever deal for the Redmond, Washington-based technology giant.
There were lots of reasons for the U.S. tech giant to buy Activision. Activision owns a multitude of popular game franchises — Call of Duty, World of Warcraft, and Candy Crush Saga.
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Microsoft would gain a host of content to add to its Xbox gaming division. And it would add a slew of talent to its in-house game studios that could help with developing new games.
But the key one, and the thing Microsoft is betting its gaming future on, was cloud gaming — and that’s what ultimately threw a spanner in the works for the company’s multibillion-dollar bid to swallow Activision when U.K. regulators chose to block the deal Wednesday.
What is cloud gaming?
Cloud gaming is a technology that lets people play games from any device with an internet connection – a console, PC, smart TV, or a mobile phone — from a far-flung data center.
Traditionally, you’d need some dedicated hardware to play a game, like an expensive console or PC.
Things have gotten better over time with advances in smartphones, and there are now even major studio-quality games that can be played on phones, like Call of Duty Mobile.
But what cloud gaming offers — that makes it a differentiator — is a service on which you can stream a selection of titles in real time from a company’s remote data centers, just like you would a movie or TV show on Netflix.
Microsoft has invested huge amounts of capital and time into making cloud gaming a core part of its gaming offering. The company added cloud gaming as a free perk within its Xbox Game Pass subscription product, which offers people access to a multitude of titles for a monthly fee.
Cloud gaming could benefit consumers in developing markets where consoles and PCs are too expensive to own.
Microsoft has lost ground to console rivals — particularly Sony — over the years. In the last generation of consoles, Sony won the infamous “console wars” with its PlayStation 4 machine, which topped Microsoft’s Xbox One in terms of lifetime sales.
With the current generation of consoles, which were launched in November 2020, it has been more of the same. The PS5 has sold 32 million units to date, according to its latest quarterly numbers.
Microsoft doesn’t publish unit sales in its results, however an estimate from the video game data website VGC places lifetime sales of its Xbox Series X and S consoles just north of 20 million units.
Microsoft CEO Satya Nadella outlined the vision the company has for cloud gaming and its incorporation of Activision Blizzard in an interview with CNBC’s Tanvir Gill in November.
“We want people to be able to enjoy the games they love on platforms they are playing in. And that’s our goal,” Nadella said.
“We love the console, the Xbox, we love the PC, we love mobile. We love xCloud, which is the streaming service, so that you can even play on your television and what have you.”
“Activision is a fantastic partner of ours today that we want to be able to sort of take all the content and make sure it’s available on every platform,” he added.
Why the CMA is concerned
In its merger review published Wednesday, the CMA said that it was concerned Microsoft’s dominance of cloud gaming could hurt competition in that particular market.
“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” the CMA said in a press release Wednesday.
Microsoft takes up 60-70% of the overall cloud gaming market, according to the regulator.
The CMA — in addition to other regulators and rivals like Sony — fear that Microsoft could in future withhold its blockbuster Call of Duty, Warcraft and Diablo titles from other cloud gaming platforms.
Call of Duty is Activision Blizzard’s crown jewel, selling huge numbers every year. Its Warzone battle royale multiplayer mode alone was played by more than 6 million people in the first 24 hours of its release.
That makes it an extremely attractive asset for a company like Microsoft. Think of it like Nintendo announcing it was going to buy Electronic Arts, and it had a subscription service you could pay $10 a month for to play every new FIFA soccer game the day it came out.
In addition to Xbox, Microsoft also owns Azure, the cloud computing platform, which is used by thousands of companies for their data storage and computing power needs.
“While Microsoft has formed partnerships with third party cloud gaming providers to bring select ABK titles to their services, this does not necessarily mean these companies will be receiving unrestricted access to those games by default,” analyst firm Omdia said in emailed comments to CNBC.
“There will still be licensing terms, fees and conditions that operators have to pay – fees which Microsoft will have absorbed in a different way as part of the acquisition itself.”
“Microsoft also owns the Azure infrastructure that powers Xbox Cloud Gaming and other third party cloud services, who will be paying for every minute and every user provided by the Azure backend,” Omdia added.
“This should ensure that ten years down the line – when cloud gaming has a much larger addressable market – Microsoft will face lower operating costs than competing services.”
Cloud gaming isn’t perfect
Ultimately though, cloud gaming is still in its infancy. The technology requires a strong internet connection to function well, otherwise gamers face drops in performance and latency issues.
Shooters and fighting games are particularly demanding in terms of responsiveness.
Google notably killed its cloud gaming service, Google Stadia, in September only three years after launching it following struggles to find the right product-market fit for the platform.
Cloud gaming also isn’t a huge market. Cloud-enabled gaming services generated $5.1 billion of revenue in 2022, according to data from Omdia, less than 15% of the $35 billion made by console game sales.
But the CMA’s worry is that Microsoft could throttle the industry going forward as it becomes a more mass market technology. Cloud gaming revenues tripled in 2022 year-on-year, according to the CMA.
“What the CMA is doing is taking a forward-looking view on the matter, taking into account concerns of where cloud gaming lands in the future, relative to its small size today,” Omdia said.
“Our projection is that cloud gaming is growing rapidly, with revenue more than doubling by 2026.”
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Technology
Nvidia’s Huang says he’s surprised AMD offered 10% of the company in ‘clever’ OpenAI deal
Nvidia CEO Jensen Huang said Wednesday that he’s surprised Advanced Micro Devices offered 10% of itself to OpenAI as part of a multibillion-dollar partnership announced earlier this week.
“It’s imaginative, it’s unique and surprising, considering they were so excited about their next generation product,” Huang said in an interview with “CNBC’s Squawk Box.” “I’m surprised that they would give away 10% of the company before they even built it. And so anyhow, it’s clever, I guess.”
OpenAI and AMD reached a deal on Monday, with OpenAI committing to purchase 6 gigawatts worth of AMD chips over multiple years, including its forthcoming MI450 series. As part of the agreement, OpenAI will receive warrants for up to 160 million AMD shares, with vesting milestones based on deployment volume and AMD’s share price.
If OpenAI exercises the full warrant, the company could acquire roughly 10% ownership in AMD.
AMD shares have soared since the announcement and were up 5% Wednesday, rising a staggering 35% so far this week. Nvidia shares were nearly 3% higher on Wednesday following Huang’s comments.
The deal challenges Nvidia’s dominance in the AI chip industry, a market where AMD has sought to catch up, alongside cloud providers which are developing their own chips.
Nvidia late last month announced it planned to invest up to $100 billion in OpenAI over the next decade. OpenAI agreed to build and deploy Nvidia systems that require 10 gigawatts of power, which Huang said at the time of the announcement is equal to between 4 million and 5 million graphics processing units (GPUs).
Huang said the investment is “very different” from OpenAI’s deal with AMD in that it allows Nvidia to sell directly to the ChatGPT creator.
Nvidia’s investment in OpenAI has underscored concerns about the “circular nature” of some AI infrastructure deals.
Asked how OpenAI will fund the deal with Nvidia, Huang said, “They don’t have the money yet.”
“They’re going to have to raise that money through, first of all, their revenues, which is growing exponentially, equity or debt,” Huang said. “They gave us the opportunity to invest alongside other investors when the time comes.”
Huang added that after Nvidia previously invested in OpenAI, his “only regret is that we didn’t invest more.”
Jensen Huang, CEO of Nvidia, speaking on CNBC’s Squawk Box on Oct. 8th, 2025.
CNBC
Huang also confirmed Nvidia’s involvement in xAI’s latest funding round, in which Elon Musk’s AI startup is reportedly seeking to raise about $20 billion, according to Bloomberg. He said he’s “super excited” about the financing opportunity, adding that he wishes he could give Musk more money.
“Almost everything that Elon is part of, you really want to be part of as well,” Huang said.
Nvidia has also backed AI data center operator CoreWeave, which Huang said he considers one of several “terrific investments” made by the company recently.
“[They’re] really special companies, and they’re building, they’re part of our ecosystem building out the AI infrastructure for the world,” Huang said.
Nvidia and AMD year-to-date stock chart.
Amazon is launching prescription drug kiosks at some One Medical offices in Los Angeles, the company announced Wednesday, in a move that could disrupt brick-and-mortar pharmacy businesses.
The kiosks are operated by Amazon Pharmacy and work similar to a vending machine, disbursing prescriptions for patients “within minutes” of their doctor visit, the company said.
Each machine can stock hundreds of prescriptions, such as antibiotics, inhalers and blood pressure treatments, with inventory that’s tailored to specific locations.
“We know that when patients have to make an extra trip to the pharmacy after seeing their doctor, many prescriptions never get filled,” said Hannah McClellan, Amazon Pharmacy’s vice president of operations. “By bringing the pharmacy directly to the point of care, we’re removing a critical barrier and helping patients start their treatment when it matters most — right away.”
The company is deploying its prescription vending kiosks as pharmacy chains, including Rite Aid, CVS and Walgreens, have struggled with falling drug margins. They also face growing competition for sales of higher-margin items like candy and paper towels from players such as Amazon and Walmart.
Rite Aid last week closed all of its remaining stores after more than 60 years in business, while Walgreens and CVS have also shuttered locations in recent years.
Amazon has for years worked to push deeper into multitrillion-dollar U.S. health-care industry, which is notoriously complex and inefficient.
The company in 2018 acquired online pharmacy PillPack for about $750 million, and launched its own offering two years later called Amazon Pharmacy. It then bought primary-care clinic One Medical in 2022 for $3.9 billion, the third-largest acquisition in its history. Amazon also experimented with its own telehealth service before shuttering it in 2022.
Earlier this year, Amazon restructured its health-care businesses into six units “to move faster and continue to innovate,” after a handful of top health executives departed, CNBC previously reported.
Amazon will start rolling out the kiosks at One Medical clinics in downtown LA, West LA, Beverly Hills, Long Beach and West Hollywood. The company said it expects to add more One Medical offices and other locations “soon after.”
“Over time, we see real potential for this technology to extend to other environments — anywhere quick access to medication can make a difference,” McClellan said in an email.
Amazon pharmacy kiosk.
Courtesy: Amazon
Before patients can use the kiosk, their provider must first send a prescription to Amazon Pharmacy, where it’s verified by one of the company’s pharmacists. Users complete their order in the Amazon app, then scan a QR code at the kiosk.
A remote pharmacist completes a final check of the order before the medication is dispensed, the company said. Patients can also speak with the pharmacist through the kiosk via video or phone call.
McClellan said the kiosks aren’t meant to replace pharmacists “but to bring their expertise closer to the point of care.”
“This model keeps pharmacists at the center of the care experience while expanding how and where they can support patients,” she added.
At launch, the kiosks won’t be available to telehealth patients, only those who receive in-person care at One Medical. Patients aren’t required to be a One Medical member to use the kiosks.
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