Speaking at the Casual Connect conference in Seattle, Newell expressed concerns with the direction in which Microsoft is taking its next version of Windows.
"I think Windows 8 is a catastrophe for everyone in the PC space," Newell said.
"I think we'll lose some of the top-tier PC/OEMs, who will exit the market. I think margins will be destroyed for a bunch of people. If that's true, then it will be good to have alternatives to hedge against that eventuality."
Newell emphasized the importance of an open operating system to software innovation, something that could be lacking on Windows 8 with software distributed through a built-in Metro app store.
"In order for innovation to happen, a bunch of things that aren't happening on closed platforms need to occur," Newell added. "Valve wouldn't exist today without the PC, or Epic, or Zynga, or Google. They all wouldn't have existed without the openness of the platform.
"There's a strong tempation to close the platform, because they look at what they can accomplish when they limit the competitors' access to the platform, and they say 'That's really exciting'.
"We are looking at the platform and saying, 'We've been a free rider, and we've been able to benefit from everything that went into PCs and the Internet, and we have to continue to figure out how there will be open platforms'."
Newell's criticism of Windows 8 came immediately after discussing Valve's plan to launch a native Steam client for Linux.
"The big problem that is holding back Linux is games," he said. "People don't realise how critical games are in driving consumer purchasing behaviour.
"We want to make it as easy as possible for the 2,500 games on Steam to run on Linux as well. It's a hedging strategy."
Valve had previously revealed that Left 4 Dead 2 will be the first title it ports to Linux. There is no date yet for when Steam will launch on Linux.
Windows 8 will launch on October 26.