US clears way for antitrust inquiries of Nvidia, Microsoft and OpenAI
WASHINGTON – Federal regulators have reached a deal that allows them to proceed with antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia play in the artificial intelligence (AI) industry, in the strongest sign of how regulatory scrutiny into the powerful technology has escalated.
The Justice Department and the Federal Trade Commission (FTC) struck the deal over the past week, and it is expected to be completed in the coming days, according to two people with knowledge of the matter, who were not authorised to speak publicly about the confidential discussions.
Under the arrangement, the Justice Department will take the lead in investigating whether the behaviour of Nvidia, the biggest maker of AI chips, has violated antitrust laws, the people said.
The FTC will play the lead role in examining the conduct of OpenAI, which makes the ChatGPT chatbot, and Microsoft, which has invested US$13 billion (S$17.5 billion) in OpenAI and made deals with other AI companies, the people said.
The agreement signals intensifying scrutiny by the Justice Department and the FTC into AI, a rapidly advancing technology that has the potential to upend jobs, information and people’s lives.
Both agencies have been at the forefront of the Biden administration’s efforts to rein in the power of the biggest tech companies. After a similar deal in 2019, the government investigated Google, Apple, Amazon and Meta and has since sued each of them on claims that they violated anti-monopoly laws.
For months, Nvidia, Microsoft and OpenAI largely escaped the brunt of the Biden administration’s regulatory scrutiny. But that began to change as generative AI, which can produce human-like text, photos, videos and audio, burst onto the scene in late 2022 and created an industry frenzy.
Regulators have recently signalled that they want to get ahead of developments in AI. In July, the FTC opened an investigation into whether OpenAI had harmed consumers through its collection of data.
In January, the FTC also started a broad inquiry into strategic partnerships between tech giants and AI start-ups, including Microsoft’s investment in OpenAI and Google’s and Amazon’s investments in Anthropic, another young AI company.
Still, the US lags behind Europe in regulating AI. European Union officials agreed in 2023 on landmark rules to govern the fast-evolving technology, focused on the riskiest ways in which it can be used.
In Washington in May, a group of senators released legislative recommendations for AI, calling for US$32 billion in annual spending to propel American leadership of the technology but holding off on asking for specific new regulations.
The discussions between the FTC and Justice Department over the AI companies entered their final stages within the last week and involved the senior levels of both agencies, said one person with knowledge of the discussions, who is an FTC official.
FTC chair Lina Khan said in a February interview that when it came to AI, the agency was trying to spot “potential problems at the inception rather than years and years and years later, when problems are deeply baked in and much more difficult to rectify”.
Spokespeople for the FTC and the Justice Department declined to comment.
Nvidia, OpenAI and Microsoft have been in the spotlight as some of the biggest winners of the AI boom, which has raised questions about their dominance.
Nvidia, a Silicon Valley chipmaker, is the primary provider of graphics processing units, or GPUs, which are components adapted for AI tasks like machine learning.
After AI took off, tech companies raced to get their hands on Nvidia’s GPUs, doubling and tripling its sales. Nvidia’s stock price has soared more than 200 per cent over the past year, and the company’s market capitalisation exceeded US$3 trillion for the first time on June 5, surpassing Apple.
Industry players have grown worried about Nvidia’s dominance, two people with knowledge of the concerns said, including how the company’s software locks customers into using its chips, as well as how Nvidia distributes those chips to customers.
Microsoft, the world’s most valuable public tech company, has also become a leading purveyor of AI. It owns 49 per cent of OpenAI, which vaulted into the public consciousness with the 2022 release of ChatGPT.
The chatbot’s ability to respond to questions, generate images and build computer code captivated people and quickly made the start-up one of the most prominent companies in the tech industry.
Microsoft has woven OpenAI’s technology into its own products. AI now generates answers for users of its search engine, Bing, and can help build presentations and documents in PowerPoint and Word. The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to AI systems.
Microsoft’s AI deals have attracted scrutiny for giving one of the biggest tech companies influence over an emerging technology, while some in the industry have raised questions about whether the deals are structured in a way that allows Microsoft to avoid direct review by regulators.
Microsoft structured its minority stake in OpenAI in part to avoid antitrust scrutiny, the Times has reported. Microsoft also reached a deal in March to hire most of the staff of Inflection AI, another AI start-up, and license its technology. Because the deal was not a standard acquisition, it may be harder for regulators to scrutinise.
Last week, the Justice Department’s antitrust division organised a conference about AI at Stanford University. In his opening remarks, Mr Jonathan Kanter, the top antitrust official at the agency, pointed to “structures and trends in AI that should give us pause”.
“AI relies on massive amounts of data and computing power, which can give already dominant firms a substantial advantage,” he said.
US clears way for antitrust inquiries of Nvidia, Microsoft and OpenAI. (2024, June 6). The Straits Times. https://www.straitstimes.com/business/us-clears-way-for-antitrust-inquiries-of-nvidia-microsoft-and-openai