The Microsoft chief pegged Amazon as his most direct competitor in the increasingly important cloud space — with Google a close third.
The tech giants have all been ramping up investment in cloud computing in recent years, as the so-called internet of things and ever-growing pool of connected devices demands greater computing power and storage capability.
But Google and Amazon, he said, use revenue from advertising and retail to support their cloud businesses and other ventures — which might run counter to the interests of their business customers.
"Amazon and Google both are fantastic at being able to rig transactions. So it's not that Google is somehow more friendly to retailers," Nadella said. "They have a nice two-sided market that they can subsidize one to advantage [the other]."
Nadella called the advertising business "funky," with its auction-based pricing model that raises prices as more retailers buy in.
"I've never seen business models where, [when] there's more demand, there are higher prices," he said. "So I feel like any customer who is essentially subsidizing their own tax increase should think through exactly how that's going to work out in the long run."
Listen to the full interview on Fortt Knox: