A fresh wave of artificial intelligence startups has caused a stir in Silicon Valley and the broader business landscape throughout this year. However, amid the changes, one constant remains: Big Tech’s continued dominance.
Following Microsoft Corp.’s $10 billion investment in OpenAI in January, a race ensued among other tech giants to collaborate with leading AI startups through funding and cloud computing deals. Salesforce Inc. took the lead in a funding round for Hugging Face, valuing the startup at $4.5 billion. Alphabet Inc. and Amazon.com Inc. invested billions in OpenAI’s competitor, Anthropic. Nvidia Corp. appeared to support almost every noteworthy AI startup.
As a result, many of the most promising AI startups now heavily rely on established tech giants for their financial backing and infrastructure needs. This dynamic has started drawing the attention of regulators.
Microsoft’s partnership with OpenAI is facing scrutiny from UK and US competition regulators. In the US, the Federal Trade Commission, under the Biden administration’s direction, is tasked with promoting “a fair, open, and competitive AI ecosystem.” The agency has previously sought public input on whether extensive cloud computing contracts could be considered anti-competitive.
Ngor Luong, a senior research analyst focusing on AI investment trends at Georgetown University’s Center for Security and Emerging Technology, noted, “What regulators might be concerned about is that the story of Big Tech’s strategic investment in AI startups could have the potential to become the story of Big Tech’s AI monopoly.”
For AI companies, these deals with Big Tech serve as a vital lifeline. Building large language models, the foundation of AI chatbots like ChatGPT, is costly and computationally intensive. Large tech companies stand out as businesses with the infrastructure and funds to support these efforts.
For Big Tech companies, these deals help solidify their hold on a competitive and rapidly evolving market, especially after some were caught off guard by the massive success of OpenAI’s ChatGPT a year ago. These partnerships also enable tech giants to boost demand for their products, be it the chips sold by Nvidia or cloud-computing services from Microsoft, Google, and Amazon.
Nvidia, in a recent blog post, highlighted making “more than two dozen investments” this year, emphasizing that these partnerships stimulate joint innovation, enhance the NVIDIA platform, and expand the ecosystem.
Apart from OpenAI, Microsoft has invested in Inflection AI and Adept, among other billion-dollar AI startups. However, these deals are much smaller than the $13 billion committed so far to the ChatGPT-maker.
Microsoft’s unique relationship with OpenAI came into focus in November when CEO Sam Altman was briefly ousted from the startup. Microsoft CEO Satya Nadella played a key role, along with other investors, in reversing the board’s decision. At one point, Microsoft even expressed the intention to hire Altman and his OpenAI colleagues to form a new Microsoft AI unit.
In response to regulators’ concerns, Microsoft clarified that it doesn’t own a traditional stake in OpenAI. The company emphasized, “It is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to a share of profit distributions.”
While Microsoft, Amazon, and Alphabet have been highly active this year in supporting AI startups, two other Big Tech companies, Apple Corp. and Meta Platforms Inc., have largely refrained from such deals. Apple has developed its own large language model called Ajax and introduced an internal chatbot named “Apple GPT.” Meta, on the other hand, has an open-source large language model and has formed partnerships with other Big Tech companies, including Microsoft and Amazon.