Microsoft wants to leverage LLMs to expand their influence in the software development market. For them, Copilot is both revenue source and a moat, so it behooves them to claim that these models don't constitute copyright infringement. But there's no business benefit to Valve in allowing AI-generated art assets on Steam, and a small (though nonzero) amount of risk.

The best case scenario for Microsoft would be supplying the world with programming tools far ahead of all others (no idea, haven't tried any of that stuff), while maybe not getting sued to bits. The best case scenario for Valve would be not getting sued to bits while getting even more spammed by low-effort money grab attempts that hope to luck into virality than they already are.

At first approximation, yeah, the risk of getting sued to bits might be roughly the same. But the upside is not.

I'd say that too if I was Microsoft, but that doesn't make it true.

And Microsoft isn't the government. So I see no bearing on the actual issue at hand, which is valve protecting it's own ass from lawsuits that are in the realm of murk at best.

It isn’t a settled legal issue yet. It could be that Valve and Microsoft are responding to different incentives, because they have different business models. But it could also just be that their lawyers have different legal opinions.