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Always try to remove them in safe mode
After spending all day troubleshooting and reinstalling Steam a couple of times, I figured it out: Having my Blue Icicle (XLR-USB adapter for a mic) plugged in was causing the issue. Soon as I disconnected the Icicle, Xbox One and Steam controllers were detected instantly. The odd thing is that Windows was detecting the controllers right away, it was just Steam that was having a hard time.
In future if anyone has this problem I suggest starting with disconnecting non-vital USB devices.
Thanks for the input! I actually had kid of a break from my gaming computer and forgot about this issue. I don't have it anymore and I have changed up my connected USB devices so that may very well be the reason :)
I tried your solution and it works but it doesn't work every time. I have to keep dissconnecting every device so theres not one particular device that's causing the issue. Is there a setting in steam or windows to prioritize connecting a controller?
Takes 10 years for steam to recognize the controller.
Nothing else but the wireless dongle is plugged in.