> This is Microsoft's embrace, extend and extinguish strategy from the 1990s in a new wrapper
We're all right to be cautious about trusting large companies' motives when they embrace an open standard. But I don't think there's any reason to invoke EEE! until they have introduced a proprietary (i.e. closed-source) implementation of something and then added non-standard extensions.
Since much of Microsoft's recent activity has been released as open source (MIT licensed, no less), I have a hard time believing Microsoft would go down that road again any time soon.
Rather, I think they're building their business on providing the best and easiest-to-use hosting and cloud services provided you're using their excellent and free developer tooling. And I'm OK with that, since they're not doing anything that is unfairly competitive. (Even AWS could start providing VSCode extensions and they'd be on equal footing with Microsoft, though to win they'd have to compete with MS's cloud directly.)