Microsoft and Nvidia have quickly taken prime positions in theartificial intelligence revolution.The tech giantshavea combined market value of $6.6 trillion (€6.16 trillion), making themtwo of thethree largest companies in the world.
Microsoft's recent success has been underpinned byits $13 billion bet onOpenAI, the startup behind the ChatGPT chatbot, whileNvidiacan boast the world's mostadvanced chips that are vital to running high-end AI systems.
But their good fortune meanscompetition authorities in theUnited States are circling.Earlier this month, the US Department of Justice (DOJ) and theFederal Trade Commission (FTC) reached a deal on how to investigatethe two firms' dominant position in the AI space.
The FTC is set to focus on the close relationship between Microsoft and Open AI, whose parent companyis a non-profit. The DOJ will, meanwhile,lead the investigation into Nvidia's competitive edge. The chipmakerhas around 80% of the AI semiconductormarket and is nowvalued at$3.32 trillion, up from just $364 billion two years ago.
"Big Tech has gained too much power in the last 15 years or so, and regulators have been asleep at the wheel," Simonetta Vezzoso, a lawyer and economist from Italy's Trento University, told DW. "Now they worry that they might be replaying the same game with AI and want to avoid that."
Is ChatGPT4o omnipotent?
Smaller players depend on Big Tech
Startups need large amounts of data, storage and chip capacity to be able to train their AI chatbots, which is where regulators believe the tech giants hold too much power. There is some evidence that smaller players are being forcedinto exclusive, opaque deals to run technology from Nvidia,Microsoft and their rivals, whichcan give the already dominant players an even bigger advantage.
"The competition authoritieswant to protect innovation coming from startups. These deals come with a lot of strings attached, so Big Tech could be hampering that competition," Vezzoso added.
DOJ antitrust chief Jonathan Kanter told an AI conference at Stanford University in California earlier this month that "powerful network effects may enable dominant firms to control these new [AI] markets."
Recent mergers likely to be probed
Microsoft's $650 million acquisition of Inflection AI,the startup behind the Pi personal assistant app,in March also raised eyebrowsas the deal may have been designed to avoid merger disclosure rules.
"Microsoft bought Inflection without buying it," Pedro Domingos,professor emeritus of computer science and engineering at the University of Washington, told DW. "They broke it into pieces, hired most of their staffers and paid offthe investors."
Some policymakers believe the lack of scrutiny over earliermergerssaw Big Tech acquirehundreds ofstartupsthat could have gone much furtherto disrupt the tech sector,so their probes will also focus on the impact on innovation.
Vezzoso said that to remedy their past mistakes, antitrust regulators are keen to act more quickly and"reverse the burden of proof" from themselves to the tech giants. If necessary, shecalled for "very resolute measures on Big Tech."
"I would like to see them [regulators] be very assertive.If abig tech firmwantsto buy a small startup, they should have to show that there is no anti-competitive issue," said Vezzoso, who is alsoan external consultant for the human rights group Article 19.
Impossible to read the future?
Domingos, on the other hand, thinks it's "comical" to launch antitrust lawsuits "not about harms that have been done, but about those that might happenin the future."
The author of the book "The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World" noted how Meta CEOMark Zuckerberg has repeatedly said that Instagram would not bethe success itis today if Facebook hadn't bought it.
"Facebook gave [Instagram]a huge amount of infrastructure and expertisethat they didn't have.If you fast forward, you can apply the same reasoning to Microsoft and Nvidiaand the AI startups that they may be buying," Domingos added.
How does an AI chatbot work?
US regulators team up
US President Joe Biden vowed again this year to make scrutiny of Big Tech a priority for his administration and some legal experts havespotted a more collaborative approach from the FTC and the DOJ in cracking downon Silicon Valley's business practices.
"It used to be that the agencies divided the cases according to industry, but with this market being so large and important for antitrust enforcement, they are sharing responsibility and working hand-in-glove,"Rebecca Haw Allensworth, a professor at Vanderbilt Law School, told The Guardian recently.
As the US presidential election approaches, just a short window of opportunity may remain for the Biden administrationto take action, which could still be undone if Donald Trumpwins the White House in November.
Tech giants face growing resentment
Domingos, meanwhile, noted howfederal and state lawmakers have introduced nearly a thousand laws to regulate AI since ChatGPT was first released, noting that some policymakers have "a lot of hostility towards the big tech companies and want to use AI as a tool to attack them with."
The additional scrutiny is already having a chilling effect on the tech sector, where the big tech giants are growing increasingly scared of acquiring promising startups.
Merger and acquisitions hit a multiyear low last year in terms of deal value, falling below $300 billion, according to451 Research. In 2022, the value of all buyouts was nearly $800 billion. The large strategic tech playerssuch asMeta, Salesforce, Alphabet,Appleand Amazonmade just 4 acquisitions last year, compared to 18 a year earlier, data fromCapital IQ Pro shows.
"The big tech companies are now afraid to do acquisitions, which is damaging to the ecosystem becausefor a lot of startups — their fate in life is to be acquired—and everybody benefits,"Domingos told DW.
Edited by: Ashutosh Pandey
