Is AI Making Big Tech Too Powerful? Why This Time Could Be Different

When ChatGPT launched in November 2022, it grabbed the spotlight for OpenAI, the startup behind it. However, as usual, big tech companies are back in control. Nvidia, known for its powerful chips used in generative AI, is now competing with Microsoft to be the most valuable company in the world. Both are investing heavily in various startups to strengthen their positions, which has put them on the radar of antitrust regulators.

In the past, attempts to break up big companies have sometimes gone too far. However, big tech firms have also been known to dominate their markets aggressively. What’s surprising now is how quickly the regulators are moving. Traditionally, antitrust investigations take a long time. For example, it took 40 years for the Supreme Court to force DuPont to sell its stake in General Motors. The Federal Trade Commission (FTC) is still trying to undo Facebook’s purchases of Instagram and WhatsApp, deals made over a decade ago.

This time, regulators are acting more swiftly. They are focusing on two main concerns. First, they are examining if big tech companies are unfairly tying businesses to their products. Second, they are investigating whether some investments in AI are really disguised acquisitions meant to avoid antitrust scrutiny.

Nvidia is being looked at for possibly locking users of its graphics processing units (GPUs) into its software, creating a scarcity of GPUs that might be anticompetitive. Microsoft is under scrutiny for its $13 billion investment in OpenAI and for hiring most of the staff from Inflection, an OpenAI rival.

While there isn’t much public information on these investigations, Britain’s Competition and Markets Authority (CMA) has published a study highlighting the main concerns. It notes that Alphabet, Amazon, Apple, Meta, Microsoft, and Nvidia have made over 90 partnerships with AI model makers since 2019, mostly by taking minority stakes. The concern is that these tech giants could influence the market by controlling critical resources like computing power and data, as well as consumer access through their platforms. Some deals might be structured to avoid merger scrutiny.

In the U.S., regulators share similar concerns. They are not just looking at AI models but the entire ecosystem, from GPUs to consumer applications. The FTC is investigating whether Microsoft’s deal with Inflection was an acquisition in disguise to avoid antitrust review. Microsoft claims it was not an acquisition, as Inflection still operates independently.

Building large language models (LLMs) requires significant investment in computing power, data, and expertise. Tech giants provide the necessary resources and support, making them attractive partners for startups. However, there is a worry that these tech giants could dominate and stifle competition.

Regulating this rapidly evolving field is politically sensitive. Too much intervention could be seen as harming American innovation, especially in competition with China. However, regulators must prevent big tech from using their power to eliminate competition. They need to act swiftly but carefully to ensure fair competition without stifling innovation.

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