Our Privacy Statment & Cookie Policy

All LSEG websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.

June 7, 2024

Breakingviews: Trustbusters loom larger for Microsoft than Nvidia

by Breakingviews.

Tech giants spending heavily on artificial intelligence will also need to invest in legal advice. Technology is full of natural monopolies, and computers that simulate human intelligence may be no different. That’s the hope of companies seeking to establish profitable empires, and the fear of regulators which prefer to act quickly to stop abusive actors from snuffing out competition. But the Federal Trade Commission may loom larger for Microsoft’s legal team than the Department of Justice will for Nvidia.

The government agencies have divided up responsibility for leading investigations of the companies, the New York Times reported on Wednesday, citing two people with knowledge of the matter. A similar agreement in 2019 presaged antitrust suits against Google and Amazon.com. The FTC has already started a probe of Microsoft, according to The Wall Street Journal.

Both companies have substantial market power. Nvidia, whose market value surpassed $3 trillion on Wednesday, dominates the production of semiconductors used to train AI systems. The company’s software, used by developers so that tasks can run in parallel on chips, is both ubiquitous in AI, and proprietary. Any investigation would probably center on whether linkages between Nvidia’s software and hardware inhibit competition, and possibly on how the company distributes its chips. Intel’s past practice of offering incentives to customers, for example, spurred a multi-decade legal fight between the once-dominant chipmaker and European regulators.

Even so, it’s hard to see Nvidia’s position weakening. There is little available evidence of misbehavior. Nvidia’s abandoned deal for British chip designer Arm shows it probably cannot buy scarce tech, but it doesn’t need to. AI researchers and companies that want to build advanced data centers today have little choice but to use Nvidia.

Microsoft may be more vulnerable. The company’s agreements with OpenAI, which developed the ChatGPT chatbot, and startup Inflection AI, have allowed it to roll out AI features across its omnipresent software. These deals may be fragile.

Microsoft showed last year it had substantial influence over OpenAI, despite owning less than 50% of the startup’s for-profit subsidiary. Then in March the tech giant agreed to pay Inflection about $650 million in cash to use its models and hire most of the company’s staff. Co-founder Mustafa Suleyman now leads Microsoft AI. That looks like an acquisition by another name.

Microsoft’s $3.1 trillion market value, as well as its giant and growing collection of advanced data centers that can train and run AI programs, give it a leg up in backing startups and rolling out their products. The FTC might argue Microsoft’s clout is stifling competition. If such scrutiny slows future deals in the fast-evolving field, that might hamper Microsoft’s progress.

Context News

The U.S. Department of Justice and the Federal Trade Commission have reached an agreement where the DOJ will lead any probe of whether Nvidia violated antitrust laws, and the FTC will lead any investigations into the conduct of OpenAI and Microsoft, the New York Times reported on June 5, citing two people with knowledge of the matter. The FTC has opened an antitrust probe of Microsoft, the Wall Street Journal reported on June 6. The commission is examining whether Microsoft’s March deal with Inflection AI, an artificial intelligence startup, was designed to give the software giant control over the firm while trying to avoid an FTC review of the transaction. Microsoft agreed to pay a licensing fee of more than $600 million to use the company’s technology and hired workers including co-founder Mustafa Suleyman. He now leads Microsoft AI, a division that develops AI for Microsoft products.




Article Topics

Get In Touch


We have updated our Privacy Statement. Before you continue, please read our new Privacy Statement and familiarize yourself with the terms.x