US leads the way in antitrust investigations into Nvidia, Microsoft and OpenAI

Federal regulators have reached a deal allowing them to proceed with antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia play in the artificial intelligence industry, in the strongest sign of how regulatory scrutiny of the powerful technology has increased.

The Justice Department and the Federal Trade Commission reached the deal last week, which is expected to be completed in the next few days, according to two people familiar with the matter, who were not authorized to speak publicly about the confidential discussions.

Under the agreement, the Justice Department will take the lead in investigating whether the behavior of Nvidia, the largest maker of AI chips, violated antitrust laws, the sources said. The FTC will play the lead role in examining the conduct of OpenAI, which makes the ChatGPT chatbot, and Microsoft, which has invested $13 billion in OpenAI and struck deals with other artificial intelligence companies, the sources said.

The settlement signals heightened scrutiny by the Justice Department and FTC over artificial intelligence, a rapidly advancing technology that has the potential to disrupt jobs, information and people's lives. Both agencies have been at the forefront of the Biden administration's efforts to curb the power of the largest tech companies. After a similar settlement in 2019, the government investigated Google, Apple, Amazon and Meta and has since sued each of them accusing them of violating antimonopoly laws.

For months, Nvidia, Microsoft and OpenAI have largely escaped the brunt of the Biden administration's regulatory scrutiny. But things started to change when generative AI, capable of producing human-like text, photos, video and audio, hit the scene in late 2022 and created a frenzy in the industry.

Regulators have recently signaled that they want to get ahead of developments in artificial intelligence. In July, the FTC opened an investigation into whether OpenAI had harmed consumers through data collection. In January, the FTC also launched a broad investigation into strategic partnerships between tech giants and AI startups, including Microsoft's investments in OpenAI and Google and Amazon's investments in Anthropic, another young AI company. artificial intelligence.

However, the United States lags Europe in regulating AI. European Union officials last year agreed on key rules to govern the rapidly evolving technology, focusing on the riskiest ways it can be used. In Washington last month, a group of senators released legislative recommendations for artificial intelligence, calling for $32 billion in annual spending to advance American leadership in the technology, but holding off on calls for specific new regulations.

Discussions between the FTC and the Justice Department about artificial intelligence companies entered their final stages in the last week and involved senior levels of both agencies, said a person familiar with the discussions, who is an FTC official .

Lina Khan, chairwoman of the FTC, said in a February interview that when it came to artificial intelligence, the agency was trying to spot “potential problems early on rather than years and years and years later when the problems are deeply rooted and much more difficult to correct.”

Spokespeople for the FTC and the Justice Department declined to comment. Microsoft and OpenAI did not immediately respond to requests for comment. An Nvidia representative declined to comment.

Nvidia, OpenAI and Microsoft have been in the spotlight as some of the biggest winners in the artificial intelligence boom, which has raised questions about their dominance.

Nvidia, a Silicon Valley chipmaker, is the leading supplier of graphics processing units, or GPUs, which are components adapted for artificial intelligence tasks such as machine learning. After artificial intelligence took off, tech companies raced to get their hands on Nvidia's GPUs, doubling and tripling sales. Nvidia's stock price has risen more than 200% over the past year, and the company's market capitalization topped $3 trillion for the first time on Wednesday, surpassing Apple.

Industry players are increasingly concerned about Nvidia's dominance, two people familiar with the concerns said, including how the company's software forces customers to use its chips, as well as how Nvidia distributes those chips to customers.

Microsoft, the world's most valuable public technology company, has also become a major provider of artificial intelligence. It owns 49% of OpenAI, which became known to the public with the release of ChatGPT in 2022. The chatbot's ability to answer questions, generate images and create computer code fascinated people and quickly made the start-up one of the most important companies in the technology sector.

Microsoft has integrated OpenAI technology into its products. The AI ​​now generates responses for users of its search engine, Bing, and can help create presentations and documents in PowerPoint and Word. (The New York Times is suing OpenAI and Microsoft, alleging copyright infringement of news content related to artificial intelligence systems.)

Microsoft's deals on artificial intelligence have drawn attention for giving one of the largest 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 reported. Microsoft also reached a deal in March to hire most of the staff from Inflection AI, another artificial intelligence start-up, and license its technology. Because the deal was not a standard acquisition, it may be harder for regulators to scrutinize.

Last week, the Justice Department's antitrust division hosted a conference on artificial intelligence at Stanford University. In his opening remarks, Jonathan Kanter, the agency's top antitrust official, highlighted “structures and trends in artificial intelligence that should give us pause.”

“AI relies on massive amounts of data and computing power, which can give already dominant companies a substantial advantage,” he said.

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