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Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at Microsoft headquarters in Redmond, Washington, on May 21, 2024.

Jason Redmond | AFP | Getty Images

A half-century ago, childhood friends Bill Gates and Paul Allen started Microsoft from a strip mall in Albuquerque, New Mexico. Five decades and almost $3 trillion later, the company celebrates its 50th birthday on Friday from its sprawling campus in Redmond, Washington.

Now the second most valuable publicly traded company in the world, Microsoft has only had three CEOs in its history, and all of them are in attendance for the monumental event. One is current CEO Satya Nadella. The other two are Gates and Steve Ballmer, both among the 11 richest people in the world due to their Microsoft fortunes.

While Microsoft has mostly been on the ascent of late, with Nadella turning the company into a major power player in cloud computing and artificial intelligence, the birthday party lands at an awkward moment.

The company’s stock price has dropped for four consecutive months for the first time since 2009 and just suffered its steepest quarterly drop in three years. That was all before President Donald Trump’s announcement this week of sweeping tariffs, which sent the Nasdaq tumbling on Thursday and Microsoft down another 2.4%.

Cloud computing has been Microsoft’s main source of new revenue since Nadella took over from Ballmer as CEO in 2014. But the Azure cloud reported disappointing revenue in the latest quarter, a miss that finance chief Amy Hood attributed in January to power and space shortages and a sales posture that focused too much on AI. Hood said revenue growth in the current quarter will fall to 10% from 17% a year earlier

Nadella said management is refining sales incentives to maximize revenue from traditional workloads, while positioning the company to benefit from the ongoing AI boom.

“You would rather win the new than just protect the past,” Nadella told analysts on a conference call.

The past remains healthy. Microsoft still generates around one-fifth of its roughly $262 billion in annual revenue from productivity software, mostly from commercial clients. Windows makes up around 10% of sales.

Meanwhile, the company has used its massive cash pile to orchestrate its three largest acquisitions on record in a little over eight years, snapping up LinkedIn in late 2016, Nuance Communications in 2022 and Activision Blizzard in 2023, for a combined $121 billion.

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“Microsoft has figured out how to stay ahead of the curve, and 50 years later, this is a company that can still be on the forefront of technology innovation,” said Soma Somasegar, a former Microsoft executive who now invests in startups at venture firm Madrona. “That’s a commendable place for the company to be in.”

When Somasegar gave up his corporate vice president position at Microsoft in 2015, the company was fresh off a $7.6 billion write-down from Ballmer’s ill-timed purchase of Nokia’s devices and services business.

Microsoft is now in a historic phase of investment. The company has built a $13.8 billion stake in OpenAI and last year spent almost $76 billion on capital expenditures and finance leases, up 83% from a year prior, partly to enable the use of AI models in the Azure cloud. In January, Nadella said Microsoft has $13 billion in annualized AI revenue, more even than OpenAI, which just closed a financing round valuing the company at $300 billion.

Microsoft’s spending spree has constrained free cash flow growth. Guggenheim analysts wrote in a note after the company’s earnings report in January, “You just have to believe in the future.” 

Of the 35 Microsoft analysts tracked by FactSet, 32 recommend buying the stock, which has appreciated tenfold since Nadella became CEO. Azure has become a fearsome threat to Amazon Web Services, which pioneered the cloud market in the 2000s, and startups as well as enterprises are flocking to its cloud technology.

Winston Weinberg, CEO of legal AI startup Harvey, uses OpenAI models through Azure. Weinberg lauded Nadella’s focus on customers of all sizes.

“Satya has literally responded to emails within 15 minutes of us having a technical problem, and he’ll route it to the right person,” Weinberg said.

Still, technology is moving at an increasingly rapid pace and Microsoft’s ability to stay on top is far from guaranteed. Industry experts highlighted four key issues the company has to address as it pushes into its next half-century.

Microsoft didn’t respond to a request for comment.

Regulation

There’s some optimism that the Trump administration and a new head of the Federal Trade Commission will open up the door to the kinds of deal-making that proved very challenging during Joe Biden’s presidency, when Lina Khan headed the FTC.

But regulatory uncertainty remains.

It’s not a new risk for Microsoft. In 1995, the company paid a $46 million breakup fee to tax software maker Intuit after the Justice Department filed suit to block the proposed deal. Years later, the DOJ got Microsoft to revamp some of its practices after a landmark antitrust case.

Microsoft pushed through its largest acquisition ever, the $75 billion purchase of video game publisher Activision, during Biden’s term. But only after a protracted legal battle with the FTC.

At the very end of Biden’s time in office, the FTC opened an antitrust investigation on Microsoft. That probe is ongoing, Bloomberg reported in March.

Nadella has cultivated a relationship with Trump. In January, the two reportedly met for lunch at Trump’s Mar-a-Lago resort in Florida, alongside Tesla CEO Elon Musk.

President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.

Nicholas Kamm | AFP | Getty Images

The U.S. isn’t the only concern. The U.K.’s Competition and Markets Authority said in January that an independent inquiry found that “Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud.”

Microsoft last year committed to unbundling Teams from Microsoft 365 productivity software subscriptions globally to address concerns from the European Union’s executive arm, the European Commission.

Noncore markets

Fairly early in Microsoft’s history the company became the world’s largest software maker. And in cloud, Microsoft is the biggest challenger to AWS. Most of the company’s revenue comes from corporations, schools and governments.

But Microsoft is in other markets where its position is weaker. Those include video games, laptops and search advertising.

Mary Jo Foley, editor in chief at advisory group Directions on Microsoft, said the company may be better off focusing on what it does best, rather than continuing to offer Xbox consoles and Surface tablets.

“Microsoft is not good at anything in the consumer space (with the possible exception of gaming),” wrote Foley, who has covered the company on and off since 1984. “You’re wasting time and money on trying to figure it out. Microsoft is an enterprise company — and that is more than OK.”

It’s unlikely Microsoft will back away from games, particularly after the Activision deal. Nearly $12 billion of Microsoft’s $69.6 billion in fourth-quarter revenue came from gaming, search and news advertising, and consumer subscriptions to the Microsoft 365 productivity bundle. That doesn’t include sales of devices, Windows licenses or advertising on LinkedIn.

“As a company, Microsoft’s all-in on gaming,” Nadella said in 2021 in an appearance alongside gaming unit head Phil Spencer. “We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale.”

AI pressure

Microsoft has an unquestionably strong position in AI today, thanks in no small part to its early alliance with OpenAI. Microsoft has added the startup’s AI models to Windows, Excel, Bing and other products.

The breakout has been GitHub Copilot, which generates source code and answers developers’ questions. GitHub reached $2 billion in annualized revenue last year, with Copilot accounting for more than 40% of sales growth for the business. Microsoft bought GitHub in 2018 for $7.5 billion.

Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.

Justin Sullivan | Getty Images

But speedy deployment in AI can be worrisome.

The company is “not providing the underpinnings needed to deploy AI properly, in terms of security and governance — all because they care more about being ‘first,'” Foley wrote. Microsoft also hasn’t been great at helping customers understand the return on investment, she wrote.

AI-ready Copilot+ PCs, which Microsoft introduced last year, aren’t gaining much traction. The company had to delay the release of the Recall search feature to prevent data breaches. And the Copilot assistant subscription, at $30 a month for customers of the Microsoft 365 productivity suite, hasn’t become pervasive in the business world.

“Copilot was really their chance to take the lead,” said Jason Wong, an analyst at technology industry researcher Gartner. “But increasingly, what it’s seeming like is Copilot is just an add-on and not like a net-new thing to drive AI.”

Innovation

At 50, the biggest question facing Microsoft is whether it can still build impressive technology on its own. Products like the Surface and HoloLens augmented reality headset generated buzz, but they hit the market years ago.

Teams was a novel addition to its software bundle, though the app’s success came during the Covid pandemic after the explosive growth in products like Zoom and Slack, which Salesforce acquired. And Microsoft is still researching quantum computing.

In AI, Microsoft’s best bet so far was its investment in OpenAI. Somasegar said Microsoft is in prime position to be a big player in the market.

“To me, it’s been 2½ years since ChatGPT showed up, and we are not even at the Uber and Airbnb moment,” Somasegar said. “There is a tremendous amount of value creation that needs to happen in AI. Microsoft as much as everybody else is thinking, ‘What does that mean? How do we get there?'”

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Tesla shares climb as Musk pledges to be ‘super focused’ on companies ahead of Starship launch

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Tesla shares climb as Musk pledges to be 'super focused' on companies ahead of Starship launch

Elon Musk listens as reporters ask U.S. President Donald Trump and South Africa President Cyril Ramaphosa questions during a press availability in the Oval Office at the White House on May 21, 2025 in Washington, DC.

Chip Somodevilla | Getty Images

Tesla shares gained about 5% on Tuesday after CEO Elon Musk over the weekend reiterated his intent to home in on his businesses ahead of the latest SpaceX rocket launch.

The billionaire wrote in a post to his social media platform X that he needs to be “super focused” on X, artificial intelligence company xAI and Tesla as they launch “critical technologies” on the heels of a temporary outage.

“As evidenced by the uptime issues this week, major operational improvements need to be made,” he wrote, adding that he would return to “spending 24/7” at work. “The failover redundancy should have worked, but did not.”

An outage over the weekend briefly shuttered the social media platform formerly known as Twitter for thousands of users, according to DownDetector. Earlier in the week, the platform suffered a data center outage. X has suffered a series of outages since Musk purchased the platform in 2022.

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Musk has previously indicated plans to step away from his political work and prioritize his businesses.

During Tesla’s April earnings call he said that he would “significantly” reduce his time running President Donald Trump‘s Department of Government Efficiency.

In the last election cycle, Musk devoted time and billions of dollars to political causes and toward electing Trump in 2024. However, a story over the weekend from the Washington Post, citing sources familiar with the matter, said that Musk has grown disillusioned with politics and wants to return to managing his businesses.

Last week, Musk said in an interview at the Qatar Economic Forum that he planned to spend “a lot less” on campaign donations going forward.

The comments from Musk precede SpaceX’s Starship rocket Tuesday evening. Pressure is on for the company after two Starship rockets exploded in January and March.

Ahead of the launch, Musk announced an all hands livestream on X at 1 p.m.

Tesla is still facing fallout from Musk’s political foray, with protests at showrooms and other brand damage.

In April, Tesla sold 7,261 cars in Europe, down 49% from last year, according to the European Automobile Manufacturers’ Association.

WATCH: Elon Musk: We have seen a major rebound in demand

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Trump advisor Hassett says ‘we don’t want to harm’ Apple with iPhone tariffs

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Trump advisor Hassett says 'we don't want to harm' Apple with iPhone tariffs

NEC Director Kevin Hassett on Trump's iPhone tariff threat: In the end, we don't want to harm Apple

National Economic Council Director Kevin Hassett said Tuesday that the Trump administration does not want to “harm Apple” with tariffs.

“Everybody is trying to make it seem like it’s a catastrophe if there’s a tiny little tariff on them right now, to try to negotiate down the tariffs,” Hassett told CNBC’s “Squawk Box” on Tuesday. “In the end, we’ll see what happens, we’ll see what the update is, but we don’t want to harm Apple.”

Hassett’s comments come after President Donald Trump said in a social media post that Apple will have to pay a tariff of 25% or more for iPhones made outside the U.S. Apple has historically manufactured its products in foreign countries including China, India and Vietnam.

“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump wrote in the post. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S. Thank your for your attention to this matter!”

By some estimates, a U.S.-made iPhone could cost as much as $3,500.

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“If you think that Apple has a factory some place that’s got a set number of iPhones that it produces and it needs to sell them no matter what, then Apple will bear those tariffs, not consumers, because it’s an elastic supply,” Hassett said.

Hasset’s comments continue the administration’s push to pressure companies to shoulder the cost burden of Trump’s tariffs, instead of raising prices for consumers.

Earlier this month, Trump told retail giant Walmart to “EAT THE TARIFFS” after the company warned it would have to pass those added costs on.

Shares of Apple were up more than 1% Tuesday.

Apple did not immediately respond to CNBC’s request for comment.

WATCH: NEC Director Kevin Hassett on Trump’s iPhone tariff threat: In the end, we don’t want to harm Apple

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Ambience announces OpenAI-powered medical coding model that outperforms physicians

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Ambience announces OpenAI-powered medical coding model that outperforms physicians

Dr. Priti Patel, CMIO at John Muir Health, uses Ambience before starting a patient encounter.

Courtesy of Ambience Healthcare

Artificial intelligence startup Ambience Healthcare on Tuesday announced a new medical coding model that outperforms doctors by 27%.

Ambience uses AI to draft clinical notes in real-time as doctors consensually record their visits with patients. The company used tools from OpenAI to build the new model.

The startup is part of a fiercely competitive market that has taken off as health-care executives search for solutions to help reduce staff burnout and daunting administrative workloads. 

The company’s new model can listen to patient encounters and identify ICD-10 codes, which are internationally standardized classifications for different diseases and conditions. There are about 70,000 ICD-10 codes that are regularly updated and used to facilitate billing and other reporting processes in health care. 

Ambience said its new ICD-10 model can reduce billing mistakes and help clinicians and professional coders work more efficiently. The model notched a “27% relative improvement over physician benchmarks,” according to a release on Tuesday.  

“We’re not replacing doctors or coders,” Brendan Fortuner, Ambience’s head of engineering, told CNBC in an interview. “What we’re doing is we’re liberating them from administration, and we’re fixing mistakes that help make health care better, safer, more cost-effective.”

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Documenting ICD-10 codes has traditionally been a labor-intensive task in health care, but it’s a crucial way to track outcomes, mortalities and morbidities in a standardized way, said Dr. Will Morris, the chief medical officer of Ambience.

“If you think about it from a data perspective, it’s how you can compare and contrast clinician A to B, or health system A to B,” Morris said in an interview. “It’s the cornerstone for quality.”

Ambience’s technology is used at more than 40 health-care organizations, like Cleveland Clinic and UCSF Health. It has raised more than $100 million, according to PitchBook, from investors including Kleiner Perkins, Andreessen Horowitz and the OpenAI Startup Fund. 

The company is reportedly seeking fresh capital at a valuation of over $1 billion, according to a report from The Information. Ambience declined to comment on the report. 

Ambience trained its new AI model using OpenAI’s reinforcement fine-tuning technology. This technology allows companies to tune OpenAI’s best reasoning models for very specific domains, like health care. 

To validate the model, Ambience tested it against a “gold panel” set of labels, the company said. The labels were established by a group of expert clinicians who evaluated complex clinical cases and came to an agreement on what the right codes were. 

Ambience’s AI platform for compliant documentation, CDI, and coding.

Courtesy of Ambience Healthcare

The company then recruited 18 different board-certified doctors and compared their performance on ICD-10 coding accuracy to the model’s performance. That comparison showed the Ambience technology performed 27% better than the physician baseline. 

“It shows for the first time that an AI system can actually surpass clinician experts at a very, very important administrative task, especially in coding,” Fortuner said. 

Ambience already has similar capabilities available for other medical codes like Current Procedural Terminology (CPT) codes, and Fortuner said it’s exploring how to tackle other areas like prior authorizations, utilization management and clinical trial matching. 

The company’s new ICD-10 model will roll out to customers over the summer.

“Getting it right at the point of care is a fundamental change,” Morris said.

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