[yladiz]

I'd be willing to bet that even if Microsoft did create VSCode for the purposes of cutting Github's expansion, the effect that VSCode had on Github's valuation is extremely overstated here. The total valuation comes from a range of factors, but let's say there are two major ones: number of users and number of paying organizations. The latter is almost completely not dependent on Atom (companies would not use Atom as a deciding factor to use Github) and while some users might use Github because they used Atom first, I don't think that this is large enough that the migration from Atom to VSCode negatively impacted the valuation.

I think a simpler explanation is correct: Microsoft saw that open source developer tools are gaining a lot of popularity and also knew that it could help revitalize/modernize their image, so they authorized the funding for the creation of a (mostly) open source code editor, and it gained popularity because it was good.