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Feds Open (More) Antitrust Probes into OpenAI, Nvidia and Microsoft: Reports
Generative AI's Big 3 -- OpenAI, Nvidia and Microsoft -- are once again in regulators' crosshairs for potential anti-competitive business practices.
In late 2023, French authorities raided Nvidia offices as part of an anti-competition investigation. Earlier this year, the Federal Trade Commission (FTC) named Microsoft and OpenAI among the subjects of a similar inquiry stateside.
This week, the antitrust spotlight is back on Nvidia, Microsoft and OpenAI. Two separate reports from the Wall Street Journal and The New York Times indicate that U.S. antitrust watchdogs have launched investigations into the companies' business practices.
Per NYT, the Department of Justice (DoJ) and the Federal Trade Commission (FTC) have agreed to split the work of investigating the three companies, with the DoJ focusing on Nvidia and the FTC on OpenAI and Microsoft.
According to the NYT report, which cited two unnamed people with knowledge of the matter, the DoJ and FTC came to an agreement about the division of labor last week that is set to be finalized "in the coming days."
Nvidia, OpenAI and Microsoft are arguably the biggest players in the generative AI space, both by value and influence. OpenAI owns the most-used generative AI chatbot in ChatGPT and is estimated to be valued at over $80 billion.
Microsoft is OpenAI's biggest backer, having contributed $13 billion to the company so far. Microsoft's "Copilot" AI portfolio heavily uses OpenAI technologies. Between its vast existing user base and the immense compute power of its Azure cloud platform, Microsoft's AI business has flourished. With a market cap of over $3.1 trillion, it's currently the most valuable company in the world.
Nvidia, meanwhile, is the second, having crossed the $3 trillion mark just this week. Nvidia is also the world's leading AI chipmaker -- and, with at least a 70 percent market share, its rivals are nowhere close.
"The discussions between the F.T.C. and Justice Department over the A.I. companies entered their final stages within the last week and involved the senior levels of both agencies," NYT reported.
Concerns About Microsoft's Dealings with Inflection AI
That's not where the scrutiny ends for Microsoft. According to the WSJ report, Microsoft's "soft acquisition" of Inflection AI this past spring is under separate investigation by the FTC.
In March, Microsoft announced it was hiring multiple high-level personnel from Inflection, a developer of AI chatbot technologies, to start its new AI division headquartered in London. Among them were Inflection co-founder Mustafa Suleyman, whom Microsoft named the first CEO of Microsoft AI; Inflection chief scientist Karén Simonyan, now the chief scientist of Microsoft AI; and an estimated 70 other Inflection employees, including researchers and engineers.
In addition to poaching most of Inflection's employees, Microsoft was also reported to have paid the startup $650 million to license its AI models.
The moves essentially amounted to an acquisition in all but name, potentially allowing Microsoft to bypass FTC reporting requirements. Under the Clayton Act, as of January 2024, any proposed merger or acquisition valued at $119.5 million or higher must be reported to the FTC to ensure it doesn't violate antitrust laws.
"The FTC is now drilling down on Microsoft's deal with Inflection, seeking information about how and why they negotiated their partnership," the WSJ reported, citing an unnamed source familiar with the matter, as well as documents it has obtained. "The agency is trying to determine whether Microsoft crafted a deal that would give it control of Inflection but also dodge FTC review of the transaction."
Per the WSJ, the FTC has subpoenaed Microsoft and Inflection for documents dating back two years.
In a statement to the publication, current Inflection CEO Ted Shelton denied that his company is owned by Microsoft. "Microsoft has no investment in our company," he was quoted as saying.