Report: Microsoft under FTC investigation over Inflection AI acquisition strategy – Microsoft (NASDAQ:MSFT)

Microsoft Corp. (NASDAQ:MSFT) is reportedly under scrutiny by the Federal Trade Commission (FTC) over a recent deal with Diffraction AI.

The tech giant hired almost all of Inflection AI’s employees and agreed to pay the startup about $650 million as part of a royalty payment.

The FTC is examining the details of the agreement between Microsoft and Inflection AI to determine whether it should have been subject to antitrust scrutiny.

The FTC is examining two-year-old documents to determine whether Microsoft deliberately designed the deal to evade regulatory scrutiny, according to a Wall Street Journal report.

The FTC’s investigation is part of a broader effort to monitor AI investments by major technology companies, including Microsoft and Google’s parent company. Alphabet Inc. (NASDAQ:GOOGL).

FTC Chair Lina Khan has raised concerns that large companies could potentially monopolize the most promising AI technologies, which could hurt competition and innovation in the industry.

If the FTC concludes that Microsoft should have reported its deal with Inflection AI, enforcement action could be taken against the company.

also read: Microsoft finances startup that improves the use of artificial intelligence

Potential penalties include fines and suspension of the transaction while a full investigation is conducted. Technology companies, including Microsoft, often acquire startups primarily to hire their specialized workforce, a strategy known as “acquihire.”

In this case, Microsoft acquired Inflection AI’s talented team without buying the company. Inflection AI, known for developing one of the largest language models and an AI chatbot called Pi, continues to operate independently.

Ted Shelton, the new COO of Inflection AI, said the company will remain independent and not owned by Microsoft.

Inflection AI, backed by entrepreneurs Reid Hoffman and Greylock Partners, has shifted its focus from consumer products to business services under new management.

Microsoft shares have gained more than 27% in the last 12 months. Investors can participate in the stock via Technology Selection Sector SPDR Fund (NYSE:XLK) and IShares US Technology ETF (NYSE: IYW).

Price promotion: MSFT shares closed 1.91% higher at $424.01 on Wednesday.

Disclaimer: This content was created in part using AI tools and reviewed and published by Benzinga editors.

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