Its looking like 2025 will be one of the most consequential years for Microsoft in a long time.Since Satya Nadella became CEO in early 2014, the company has been on an upward trajectory, despite a few bumps along the way. Today its the most powerful AI company on the planet and the worlds third-most-valuable company, worth more than $3 trillion.But in these volatile times, that can change quickly thanks to a still evolving AI market, the federal government targeting high tech, and the coming wild-card Trump presidency. What challenges will the company face in 2025, and how will it handle them?Here are my top five.Microsoft and OpenAI will go from frenemies into enemiesNot so long ago,the Microsoft-OpenAI relationship was techs biggest bromance. Microsoft invested $13 billion in OpenAI, OpenAIs influence and valuation skyrocketed, and Microsoft used the companys generative AI (genAI) technology to vault to the top of the AI heap.Last year, the bromance soured andthe companies became frenemies; as OpenAI openly courted major Microsoft clients, Microsoft laid the groundwork for developing its own AI technology.Nadella disparaged OpenAI, saying, If OpenAI disappeared tomorrow, we have all the IP rights and all the capability. We have the people, we have the compute, we have the data, we have everything. We are below them, above them, around them.Dont be surprised if theres open warfare between the companies this year.OpenAI will be transforming itself from non-profit to a for-profit company, possibly changing the terms of its contract with Microsoft and allowing it to more easily pursue partnerships with other companies. In addition, the terms of the Microsoft-OpenAI deal says that when OpenAIs ChatGPT achieves whats called AGI and can reason on its own, Microsoft will lose its stake in the company.OpenAI CEO Sam Altman keeps hinting thats coming sooner rather than later. Meanwhile,Microsoft has been busy building AI technology that could replace OpenAIs as the basis for Copilot and other AI products.The upshot? Expect open warfare between the two.Microsoft will get hit with at least one US government antitrust suitDecades ago, Microsoft was Big Techs bad boy, mowing down competitors with shady actions that drew the wrath of the federal government an antitrust suit that dropped the company from the top tier of tech and led to a lost decade in which it became an also-ran.After Nadella took the helm,Microsoft became Big Techs choirboy, largely avoiding any federal suits, while Amazon, Meta, Google, and Apple were hit with antitrust actions that threaten the core of their businesses.That will probably change in 2025. The Federal Trade Commission (FTC) has launched awide-ranging investigation into what it believes may be Microsofts anticompetitive practices. The agency is looking at the very heart of the company and its business practices AI, cloud computing, its productivity suite, and Teams. The suit could also endanger the companys billion-dollar contracts with the US government,because the FTC began looking at the company thanks to its poor security practices.Whats unclear is whether the Trump administration will continue the investigation, and ultimately prosecute the company. My bet is it will. Top Trump advisor Elon Muskhas become a Microsoft competitor with his AI company xAI, and hell most certainly use his high-level access to push for prosecution.Hes already suing Microsoft and OpenAIfor trying to use their power to get a monopoly on AI.Intellectual property battles will come to a headMicrosoft and other genAI companies face an even bigger problem than antitrust lawsuits the lack of content on which to train genAI tools like Copilot and ChatGPT. Improving them requires massive amounts of intellectual property. So far, the companies have simply hoovered up anything they can find, largely without paying, claiming they can use the material under fair-use doctrine.Thats led toplenty of lawsuits against Microsoft and other AI companiesfor intellectual property theft. In one of the biggest,The New York Timesis seeking billions of dollars in statutory and actual damagesbecause of what it calls the unlawful copying and use ofThe Timesuniquely valuable works.Microsoft and other AI companieshave begun making deals with publishers to pay for the content to train their AI models. In November, Microsoftinked a deal with the publisher HarperCollinsin which itcan use many of the companys nonfiction books to train a new genAI product.That deal might well beMicrosofts first in a series of similar agreements with other companies. Expect more to follow this year.Nadella will try to keep Trump at a distanceSince Donald J. Trumps election, a number of Big Tech executives and companies have gone full-blown MAGA.In one of the more extreme makeovers, Metas Mark Zuckerberg has gone all in, donating $1 million to Trumps inauguration, eliminating fact-checking on Meta platforms, backing away from policing hate speech, ending the companys diversity efforts, killing transgender and nonbinary themes from its apps, and even removing tampons from its mens bathrooms, which it had provided for nonbinary and transgender employees.Hes not the only one. Top executives from Google, Amazon, Apple, and others have also bowed to Trump. Microsoft had been the lone holdout until early January,when it donated $1 million to Trumps inaugural. Aside from that, though, the company hasnt curtailed diversity efforts or in any other way changed its culture to put it in line with Trumps way of thinking. And Nadella hasnt visited Trump in Mar-a-Lago, as have so many other tech execs.The big question: Will Nadella continue keeping Trump at arms length, and not try to make the company culture more like Trump would like to see it? My guess is hell stay the course. But well see.We may get real revenue numbers for AI or notFinally comes perhaps the biggest issue of all for the companys financial health: Can Microsoft sign up enough customers to make its genAI ambitions worth its while? Were no longer in the early hype days when mere possibilities were more important than revenue. In 2025, the ROI rubber will meet the road of reality.This is particularly important because the investments that need to be made in genAI are far greater in scale than in any technology before it. Microsoft can spend all the billions it wants for infrastructure, electricity, data centers, training, and development. But if businesses and people dont find AI useful and open their wallets for it, that will mean nothing.Microsoft claims its got plenty of customers, but it isnt giving out details, such as how many people pay for Copilot on a monthly basis and how much revenue it gets from that. Instead,it publicizes potentially misleading statisticssuch as More than 85% of the Fortune 500 are using Microsoft AI and Nearly 70% of the Fortune 500 are using Microsoft 365 Copilot. Most likely those numbers are based on companies launching small pilot programs testing whether AI is useful. Pilots dont bring in much revenue only full deployments do.Well know in 2025 if AI is starting to pay off when Microsoft touts real revenue numbers or the number of people actively paying for AI subscriptions. Until then, consider those numbers smoke and mirrors.