Two tech giants are dominating the artificial intelligence race. US antitrust authorities are now looking more closely at them. Do strict regulations help competition or hurt the industry as a whole?
Microsoft and Nvidia are the leaders in artificial intelligence (AI). The combined market value of the two companies is $6.6 trillion (€6.16 trillion). Apple: top of the world’s most valuable companies.
Microsoft has invested a total of $13 billion in OpenAI, the company behind the ChatGPT AI chatbot. Nvidia, actually a graphics card specialist, makes the chips needed to run high-end AI systems.
Their success in the US has now brought competition regulators into action. Earlier this month, the US Department of Justice (DoJ) and the Federal Trade Commission (FTC) agreed to investigate two companies’ dominance in AI.
The FTC is focusing on the close relationship between Microsoft and OpenAI, whose parent company is a non-profit organization. The Department of Justice is investigating Nvidia’s possible competitive advantage.
The chipmaker has about 80 percent market share for semiconductors specializing in AI. In just two years, its market value has grown from $364 billion to $3.32 trillion.
“Big tech has gained enormous power over the past 15 years, and regulators have stood by and watched this growth,” said Simonetta Vezzoso, a lawyer and economist. Italian The University of Trento informed DW about this. “Controllers now want to avoid repeating the same game with AI.”
Startups depend on Big Tech
Many startups in the field of artificial intelligence require large amounts of data, storage space and chip power to develop their software. Regulators suspect that tech giants such as Microsoft and Nvidia are using their power to force startups into opaque and exclusive contracts if they want to use their technology.
“Competition authorities want to protect the innovation of startups,” says Vetzozo. “These deals come with a lot of strings attached, so Big Tech can hinder competition.”
Jonathan Kanter, head of the US Justice Department’s antitrust division, told an AI conference at Stanford University in early June that “strong network effects can enable dominant firms to control new markets.”
Probably the latest merges are being checked
In March, Microsoft acquired startup Inflection, the developer of a personal assistant app called PI. The $650 million deal also drew attention because it may have sought to circumvent merger disclosure rules.
“Microsoft bought Inflection without buying it,” Pedro Domingos, professor emeritus of computer science at the University of Washington, told DW. “The company was broken up into its component parts, most of the employees were hired and the investors were compensated.”
Some competition watchdogs believe that due to insufficient oversight, Big Tech companies have bought hundreds of startups that otherwise could have fundamentally changed the technology industry. Therefore, the impact of these achievements on innovation will be the focus of their studies.
To make up for past mistakes, competition authorities now want to act faster, says Vetsozzo of the University of Trento. He himself is in favor of “very decisive measures against Big Tech”.
“It would be good if they (regulators) were very firm. “If a big tech company wants to buy a small startup, it has to prove that it won’t create problems for competition,” said Vetsoso, who also works as a consultant for the human rights group Article 19.
What does the future hold?
Computer scientist Domingos, on the other hand, thinks it’s “strange” when antitrust lawsuits are filed “not because of harm that actually occurred,” but because of harm that may occur in the future.
Meta CEO Mark Zuckerberg has often emphasized this Instagram: would never have been so successful if Facebook I wouldn’t buy it, says Domingos. “Facebook gave Instagram a huge infrastructure and experience that the company didn’t have. The same can be said for Microsoft and Nvidia in the future in terms of the startups they might buy,” Domingos said.
Teamwork of competition guardians
US President Joe Biden has promised to make the control of Big Tech a priority of his administration. And legal experts say the FTC and Justice Department are now working more closely together to prosecute anti-competitive business practices in Silicon Valley.
“The authorities used to divide cases by industry. But because the market is so large and so important to antitrust law, they now share responsibility and work hand in hand,” Vanderbilt Law School professor Rebecca Howe Allensworth said recently. The Guardian.
A growing dislike of Big Tech
Domingos, on the other hand, emphasizes that since the appearance of ChatGPT in the United States, almost a thousand laws have been introduced to regulate artificial intelligence. In his opinion, some politicians are “very hostile towards big tech companies and want to use artificial intelligence as a tool to attack them.”
The heightened focus is already having a chilling effect on the US tech sector, where domains have declined.
Mergers and acquisitions totaled less than $300 billion last year, the lowest in years, according to data from analyst firm 451 Research. In 2022, the value of all acquisitions was almost 800 billion dollars.
Big tech companies such as Meta, Salesforce, Alphabet, Apple and Amazon made just four acquisitions last year, compared with 18 the year before, data from Capital IQ Pro shows. :
“Big tech companies are now afraid of takeovers, and that’s hurting the whole industry,” says computer scientist Domingos. “It is the fate of many startups to take over, everyone benefits from this.”