The top federal antitrust agencies are preparing to launch investigations into Nvidia, Microsoft and OpenAI and their dominant roles in the rapidly expanding AI space, the latest push by the Biden Administration to keep a sharp watch on anticompetitive behavior in technology and other critical industries.
According to reports from multiple news organizations, the Justice Department (DOJ) will investigate Nvidia, by far the largest provider of processors for AI workloads, while the Federal Trade Commission (FTC) will probe Microsoft’s tight partnership with OpenAI and its recent $650 million licensing deal with startup Inflection AI.
The investigations were first reported by The New York Times and followed up by the Wall Street Journal and others. The DOJ and FTC have been negotiating the structure of the investigations for almost a year and it is close to being finalized, according to Politico, which earlier this year reported that agencies were negotiating over which would investigate Microsoft and OpenAI.
Another part of the deal will ensure that the FTC keeps authority over Amazon while the DOJ continues to oversee Google, two other giants in a still-emerging generative AI market that could grow to as much as $1.3 trillion by 2030, according to Bloomberg Intelligence.
Nvidia Propels AI and Vice-Versa
Nvidia co-founder and CEO Jensen Huang more than a decade ago announced that the company, which had been successful muscling its GPUs into data centers to help accelerate HPC and other workloads, was putting its focus on AI. With the explosion in generative AI since OpenAI launched ChatGPT in November 2022, demand for Nvidia’s GPUs, in particular its Tensor Core H100s, skyrocketed, driving up the cost of the chips while significantly tightening supply.
It also has helped Nvidia see its market value reach $3 trillion, behind only Microsoft. Hyperscalers like Microsoft, Amazon, Google and Meta are developing their own AI-focused chips, and OpenAI CEO Sam Altman has proposed his company spend billions of dollars building facilities for manufacturing its own chips.
Intel, AMD and Arm also are building and designing silicon for AI workloads, and the unceasing demand for processing power has given smaller companies and startups like SambaNova and Graphcore encouragement as they push out their AI processors. However, Nvidia is still the giant, with Mizuho Securities estimating that the company accounts for anywhere from 70% to 95% of the market, and that’s before its latest Blackwell GPUs are available.
CNBC also noted that Nvidia is leveraging a 78% gross margin in its pricing, which the news site says is high for a hardware company that has to build and ship physical products. In the first quarter, Nvidia generated $26 billion in revenue, a 262% year-over-year increase.
Microsoft-Inflection AI Deal a Concern
Microsoft’s partnership with OpenAI – which includes a $13 billion investment and the use of the smaller company’s technology in its own products – has received regulator attention here and in Europe, and the latest deal with two-year-old Inflection AI has only further raised their interest. The FTC in January announced it was taking a look at not only the Microsoft-OpenAI relationship but also Anthropic’s collaboration with Amazon and Google to see if they violated antitrust laws.
Amazon has invested $4 billion in the AI startup, while Google has put in $2 billion.
At the time, FTC Chair Lina Khan said that “history shows that new technologies can create new markets and healthy competition. As companies race to develop and monetize AI, we must guard against tactics that foreclose this opportunity.”
The European Union in April said it wasn’t going to investigate Microsoft and OpenAI under EU merger rules, but that doesn’t rule out an antitrust probe by the European Commission, according to Reuters.
The FTC’s investigation into Microsoft will consider both OpenAI and the software giant’s deal with Inflection AI, which included not only licensing the startup’s AI models but also hiring its co-founders and much of its staff. The regulator reportedly is concerned that the Inflection AI deal was structured that way to allow Microsoft to get around regulations related to acquisitions.
In a statement to The Hill news site, a Microsoft spokesperson said the company’s “agreements with Inflection gave us the opportunity to recruit individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot, while enabling Inflection to continue pursuing its independent business and ambition as an AI studio” adding that Microsoft is “confident that we have complied with [regulatory] obligations.”
Biden’s Expansive Antitrust Efforts
The Biden Administration has put a focus on antitrust enforcement in a range of industries, including technology, pharmaceuticals, health care and airlines, with its share of wins and losses. The AI industry – which encompasses everything from hardware and software to cloud environments – has been on the front burner as well. In addition, Congress also is getting involved, as illustrated by the bipartisan AI roadmap proposed last month by a Senate working group.
The proposal was praised and criticized by outside groups. The Open Markets Institute was a critic, with Executive Director Barry Lynn writing that the proposal championed by Senate President Chuck Schumer (D-NY) did nothing to ensure that the $32 billion proposed for the initiative wasn’t scooped up by a handful of the industry’s largest players.
“AI as we experience it today is a function of monopoly power,” Lynn wrote. “And today’s very biggest monopolists are wielding AI in ways that will only further concentrate their power and impose enormous environmental costs. Worse yet they are using AI in ways that amplify some of their biggest existing threats to our society, such as disinformation, discrimination and the manipulation of citizens. This means the most effective way of protecting our democracy is to use antimonopoly law to restructure these corporations and regulate their behavior, beginning today.”
