US clears way for antitrust investigations against Nvidia, Microsoft and OpenAI

US regulators have agreed to a settlement allowing them to launch antitrust investigations into Microsoft, OpenAI and Nvidia’s dominant roles in the artificial intelligence industry, a clear sign of how much regulatory scrutiny of this powerful technology has increased.

The Justice Department and the Federal Trade Commission (FTC) agreed to the settlement last week, and the agreement is expected to close in the next few days, according to two people familiar with the matter who were not authorized to speak publicly about the confidential talks.

Under the agreement, the Justice Department will take the lead in investigating whether the conduct of Nvidia, the largest AI chip maker, violated antitrust laws, the people said. The FTC will play the primary role in investigating the conduct of OpenAI, which develops the ChatGPT chatbot, and Microsoft, which has invested $13 billion in OpenAI and has contracts with other AI companies, the people said.

The agreement signals that the Justice Department and the FTC are increasingly scrutinizing AI – a rapidly evolving technology that has the potential to upend jobs, information and people’s lives. Both agencies are at the forefront of the Biden administration’s efforts to limit the power of the biggest tech companies. Following a similar agreement in 2019, the government investigated Google, Apple, Amazon and Meta and has since sued each of them for alleged antitrust violations.

For months, Nvidia, Microsoft and OpenAI largely escaped the brunt of the Biden administration’s regulatory scrutiny. But that began to change when generative AI capable of producing human-like text, photos, videos and audio files arrived on the scene in late 2022, sparking an industry frenzy.

Regulators have recently signaled that they want to stay ahead of developments in the AI ​​space. In July, the FTC launched an investigation to determine whether OpenAI harmed consumers through its data collection. In January, the FTC also launched a broad investigation into strategic partnerships between tech giants and AI startups, including Microsoft’s investment in OpenAI and Google and Amazon’s investments in Anthropic, another young AI company.

Yet the U.S. lags behind Europe in regulating artificial intelligence. European Union officials last year agreed on landmark rules to control the rapidly evolving technology, focusing on the riskiest uses. Last month, a group of senators in Washington released proposed AI legislation, calling for $32 billion in annual spending to bolster American leadership in the technology but stopping short of calling for specific new regulations.

Discussions between the FTC and the Justice Department about the AI ​​companies entered their final stages last week and involve the senior levels of both agencies, said a person familiar with the discussions, an FTC official.

Lina Khan, chair of the FTC, said in an interview in February that when it comes to AI, the agency is trying to “identify potential problems right at the beginning, rather than many years later, when the problems are already deeply entrenched and much harder to fix.”

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

Nvidia, OpenAI and Microsoft have been in the spotlight as some of the biggest winners of the AI ​​boom, raising doubts about their dominance.

Nvidia, a Silicon Valley chipmaker, is the main supplier of graphics processing units (GPUs), components adapted for AI tasks such as machine learning. As AI took off, technology companies flocked to Nvidia’s GPUs, doubling and tripling their sales. Nvidia’s stock price has risen more than 200 percent in the past year, and the company’s market capitalization crossed the $3 trillion mark for the first time on Wednesday, surpassing Apple.

Industry participants are increasingly concerned about Nvidia’s dominance, two people familiar with the concerns said, including how the company’s software ties customers to using the chips and how Nvidia sells those chips to customers.

Microsoft, the world’s most valuable publicly traded technology company, has also become a leader in artificial intelligence. It owns 49 percent of OpenAI, which came to public attention with the release of ChatGPT in 2022. The chatbot’s ability to answer questions, generate images and create computer code captivated people and quickly made the startup one of the most well-known companies in the technology industry.

Microsoft has integrated OpenAI’s technology into its own products. AI now generates answers for users of its search engine Bing and can help create presentations and documents in PowerPoint and Word. (The New York Times has sued OpenAI and Microsoft, claiming they committed copyright infringement on news content related to AI systems.)

Microsoft’s AI deals have come under fire for giving one of the largest technology companies influence over an emerging technology. Industry experts are also asking whether the deals are structured in a way that allows Microsoft to avoid direct scrutiny from regulators.

Microsoft structured its minority stake in OpenAI in part to avoid antitrust scrutiny, The Times reported. In March, Microsoft also agreed to hire most of the staff of Inflection AI, another AI startup, and license its technology. Because the deal was not a standard acquisition, it is likely to be more difficult for regulators to scrutinize.

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

“AI is based on huge amounts of data and computing power, which can give companies that already dominate the market a significant advantage,” he said.