06/23/2024 – 5:33
Microsoft and Nvidia are winning the artificial intelligence race, but have become targeted by US anti-cartel bodies. Some experts want stricter standards, others fear a downturn in the sector. With enormous speed, Microsoft and Nvidia took the lead in the artificial intelligence (AI) revolution. Both are among the three largest companies in the world, having a combined market value of 6.6 trillion dollars.
Microsoft’s recent success was cemented by its $13 billion bet on OpenAI, the startup behind the ChatGPT chatbot; while Nvidia boasts the world’s most advanced chips, vital to operating high-performance AI systems.
This bonanza, however, caught the attention of United States anti-cartel authorities. In early June, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) reached an agreement on how to investigate both high-tech giants’ dominance in the AI sector.
The FTC will focus on the proximity between Microsoft and OpenAI, whose parent company is non-profit; while the DOJ will focus on Nvidia’s competitive advantage. Holding 80% of the AI semiconductor market, it is currently valued at $3.32 trillion, up from $364 billion just two years ago.
“Big tech gained too much power in the last 15 years, and regulators were asleep at the wheel”, criticizes lawyer and economist Simonetta Vezzoso, from the University of Trento. “Now they fear that this is happening again with AI and they want to avoid it.”
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Startups need a large volume of data, storage space and processing power to be able to train their AI chatbots, which is where regulators believe the giants have too much power. There are signs that smaller companies are being forced to enter into exclusive and opaque agreements to employ technology from Nvidia, Microsoft and their rivals, which could give already dominant players an even greater advantage.
“Anti-cartel authorities want to protect innovation coming from startups. These agreements come with many strings attached, so big tech could be posing obstacles to this competition”, warns Vezzoso.
At a conference on artificial intelligence at Stanford University in early June, DOJ Anticartel Division Assistant Attorney General Jonathan Kanter confirmed that “powerful network effects could allow dominant companies to control these new AI markets.”
The acquisition of Inflection AI – the startup responsible for the personal assistant app Pi – by Microsoft in March, for 650 million dollars, also raised concerns, as the agreement may have been drawn up in a way that circumvents transparency rules for mergers.
“Microsoft bought Inflection without buying it,” says Pedro Domingos, professor emeritus of computer science at the University of Washington. “She broke it into pieces, hired most of its employees and paid compensation to investors.”
For anti-cartel regulators, the lack of oversight in previous mergers resulted in large technology companies acquiring hundreds of startups that could have revolutionized the sector even further. Thus, the impact on innovation will also be at the center of its investigations.
In order to remedy the situation, antimonopoly regulators propose to act more quickly and “shift the burden of proof” from themselves to the tech giants. Vezzoso, who is an external consultant for the human rights group Article 19, calls for “very firm measures for big tech”, if necessary.
“I would like to see regulators be very firm. If a big tech company wants to buy a small startup, it should have to show that there is no anti-competitive issue.”
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In turn, Domingos considers it “funny” to file anti-cartel lawsuits “not for damages that were caused, but for those that could happen”, remembering how Meta’s executive director, Mark Zuckerberg, has repeated that Instagram would not be the success it was. it is today if Facebook hadn’t bought it.
“Facebook gave Instagram a huge degree of infrastructure and expertise that it didn’t have. Moving forward in time, the same reasoning can be applied to Microsoft and Nvidia, and to all the startups they have been buying”, proposes the author of the book The master algorithm: How the quest for the ultimate learning machine will remake our world (O master algorithm: How the hunt for the ultimate learning machine will remake our world).
In this 2024 election year, US President Joe Biden has once again promised that scrutiny of high-tech giants will be a priority for his administration. Some legal experts see a more collaborative approach between the FTC and DOJ to curb Silicon Valley’s business practices.
“Agencies used to divide cases according to sector, but because this market is so large and important for antitrust prosecution, they are sharing responsibility and cooperating closely,” Rebecca Haw Allensworth, a professor at the Vanderbilt Law School.
As the US presidential elections approach, there may only be a small window of opportunity left for the Biden administration to act, and its measures could still be overturned if Republican Donald Trump reaches the White House in November.
Domingos draws attention to the nearly thousand laws introduced by federal and state parliamentarians to regulate AI since ChatGPT was launched, noting that some politicians have “great hostility towards big tech companies and want to use AI as an instrument to attack them.”
The added scrutiny is already having a chilling effect on the tech sector, with giants becoming increasingly wary of acquiring promising startups.
According to the research company 451 Research, specialized in the sector, in 2023 mergers and acquisitions broke the negative record of recent years, with the value of transactions falling below 300 billion dollars – compared to 800 billion dollars in the previous year. In turn, the Capital IQ Pro platform recorded only four acquisitions by the major strategic players in high technology, such as Meta, Salesforce, Alphabet, Apple and Amazon, compared to 18 in 2022.
“Big tech companies are now afraid of making acquisitions, which harms the ecosystem, because the destiny of many startups is to be acquired, and everyone benefits from that”, argues Domingos.
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