FFVII never delves enough into him as a character, since it's more concerned with having him be this larger than life villain, but given his origin I think it's safe to say he didn't have a normal upbringing. He was raised around Shinra staff, not other children, and he never knew his mother (It's debatable if he knew Hojo was his dad or not, but he certainly never treated him as such.) His lack of social skills definitely stems from there, and was strengthened by his reputation as a legendary hero. He never had any normal friends, nor do I think he would have the capacity to reach out and make any.
His turn to villainy was fueled by his own sense of isolation and how it frustrated him. He never felt like he belonged anywhere and didn't know how to get close to anyone. He lost his only two "friends" to some Shinra bullshit, and so by Nibelhiem he was completely alone. In Crisis Core he even says he might leave Shinra, a sentiment also reflected in some UNUSED DIALOGUE
never miss an opprotunity for self-promotion
"he knows Shinra only sees him like a machine (or monster) and not a person and he resents it".
I would say this is pretty accurate. I think deep down Sephiroth just wanted somewhere to belong. This is why finding Jenova changed him so radically, it gave him context for his life. It justified his sense of separation from normal people, it gave reason to his incredible strength, and most importantly, it gave him a purpose. He wasn't a normal human, he was a Cetra! (Or acually an alien but whatever he didn't know that yet.) He could take out his resentment on humanity with justification, they had stolen the planet from his people and drove them to extinction, and worse yet they used him to fight in their little wars. So what if he kills people brutally? They're evil traitors, he's a great hero. He finally found somewhere he belonged, and found a purpose for his existence.
This is why Cloud is his worst enemy, and why he has gone to such great lengths to break him. Cloud is the opposite of Sephiroth, he is well and truly nobody. He comes from a normal family from a nowhere town, he fails to even join SOLDIER and instead becomes a lowly grunt, the same kind you slaughter all throughout FF7. He is well and truly nothing. Yet, when push comes to shove, Cloud was able to rise up where even another SOLDIER 1st Class failed and bring Sephiroth down. Sephiroth had just found the purpose that he had been searching for his entire life, and this little nobody runt took it all away from him. Him. Sephiroth. The legendary hero, savior of the plant. His ego was completely crushed in that moment, and that's why he dedicates the rest of his life to destroying Cloud outright. Cloud represents an existential threat to him, that nothing Sephiroth has really matters and that he isn't special at all, that he has no grand purpose. That's why he doesn't just kill Cloud later, even though he could. He needs to break Cloud, reduce Cloud to nothing, make him nothing more than some failed Hojo Experiment, completely remove his identity and make him into a puppet for Sephiroth's use. Only then will Sephiroth be able to feel whole. Time and time again Cloud wins though, because Sephiroth is wrong.
