Microsoft and Nvidia are leading forces in the artificial intelligence (AI) industry. In addition, with a combined market value of $6.6 trillion, the two companies are tied with Apple for the most valuable companies in the world.

Microsoft has invested a total of $13 billion in OpenAI, the company behind the chatbot ChatGPT, while Nvidia, which specializes in graphics cards, makes chips necessary for leading artificial intelligence systems.

The success of the two companies is such that US authorities – the US Department of Justice (DoJ) and the Federal Trade Commission (FTC) – have decided to launch investigations into the two industries’ strength in artificial intelligence. The FTC is focusing on the close relationship between Microsoft and OpenAI, which is a subsidiary of a non-profit organization, and the DoJ is investigating possible competitive advantages that Nvidia might have. The latter has an 80% share of the semiconductor market specializing in artificial intelligence applications – and in just two years its market value has soared from $364 billion to $3.32 trillion.

“For the last 15 years or so, Big Tech has had too much power, with regulators simply watching their strengthening,” Simonetta Vezzoso, a law and economist at Italy’s University of Trento, told DW. “And now the goal is not to repeat the same game in the artificial intelligence industry.”

Startups depend on Big Tech

There are many startups active in the field of artificial intelligence. And in order to improve and evolve their accounting they need a lot of data, storage and chips. Regulators believe that tech giants such as Microsoft and Nvidia are forcing startups to enter into opaque and exclusive contracts with them – in exchange for their technology.

“Competition authorities want to protect the innovations of startups,” Vetsozo says. “Such deals include many terms that Big Tech can use to hinder competition.”

At a recent Stanford University conference on artificial intelligence, Jonathan Kander, director of the US Department of Justice’s antitrust division, said the powerful networks of dominant companies could allow them to control new markets as well.

Research on recent mergers

In March, Microsoft acquired startup Inflection, a company that had developed a personal assistant app called PI. But the $650 million deal drew attention as the parties may have sidestepped certain merger provisions.

“Microsoft bought Inflection without buying,” Pedro Domingos, professor emeritus of computer science at the University of Washington, told DW. “They broke up the company into its individual divisions, hired most of its employees and paid off the investors.”

Several observers believe that because of the limited controls, Big Tech has bought hundreds of startups, which could be alerted to change the technology industry again. That is why the authorities are going to focus on the impact of these acquisitions on innovation during the investigations.

The mistakes of the past are about to be righted, there must now be much more immediate action. In other words, it will have to take “very decisive measures against Big Tech”, as Vetsozo says. “It would be nice [οι ρυθμιστικές αρχές] to act with dynamism. In other words, when a large technology company wants to buy a small startup, it will have to prove that competition is not hindered”, adds the expert.

Domingos, on the other hand, sees it as “strange” to bring antitrust lawsuits “not on the basis of any actual harm” but because “there is harm that could come in the future.”

Meta CEO Mark Zuckerberg has emphasized many times that Instagram would never have become so successful if it hadn’t been acquired by Facebook, as Domingos points out. “Facebook brought a huge infrastructure and expertise to Instagram that it didn’t have. This could also happen in the cases of Microsoft and Nvidia and the startups they can buy.”

Cooperation of the American authorities

US President Joe Biden has promised to prioritize the scrutiny of Big Tech – hence the closer cooperation between the FTC and the Department of Justice.

“Earlier the authorities used to divide the cases by sector. But because the market is so large and so important for competition, the authorities are now working together,” points out Rebecca Howe Allensworth, a professor at Vanderbilt Law School.

On the other hand, Domingos observes that since ChatGPT appeared in the US, thousands of bills have emerged around artificial intelligence. According to him, some politicians are “very hostile towards technology companies and want to use artificial intelligence as a tool to hurt them”.

Tighter oversight appears to be having a chilling effect on the US tech industry, with the number of acquisitions falling. According to the analysis of the company 451 Research, last year mergers and acquisitions reached a total value of only 300 billion dollars – an amount well below those recorded in recent years. By comparison, in 2022 the total value of acquisitions reached about $800 billion.

Big tech companies such as Meta, Salesforce, Alphabet, Apple and Amazon made just four acquisitions last year, compared to 18 in 2022, Capital IQ Pro data shows.

“Now the big tech companies are afraid to make acquisitions and that’s hurting the industry as a whole,” Domingos says. “Actually the destiny of many startups is to be acquired. And that’s something everyone benefits from.”

Edited by: Giorgos Passas