Big Tech’s dominance in AI sparks regulatory scrutiny as startups lean on giants for lifelines

In a dynamic year for AI startups, Big Tech's influence remains unyielding, shaping the landscape through hefty investments and partnerships. Microsoft's $10 billion injection into OpenAI sparked a frenzy, with Salesforce, Alphabet, and Amazon following suit. As these AI ventures increasingly lean on tech giants for financing and infrastructure, regulatory scrutiny intensifies. Concerns about potential AI monopolies emerge, prompting investigations by UK and US competition regulators. For AI firms, collaboration with Big Tech is a lifeline, while tech giants secure market dominance and product demand, marking a pivotal chapter in the evolving AI ecosystem..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Big Tech's Year of Partnering Up With AI Startups.By Isabella Ward and Natalie Lung.A new crop of artificial intelligence startups has shaken up Silicon Valley — and the wider business world — throughout this year, but there's one thing that hasn't changed: Big Tech still wields power..___STEADY_PAYWALL___.In the wake of Microsoft Corp.'s $10 billion investment in OpenAI in January, other tech giants raced to partner with leading AI startups through funding and cloud computing deals. Salesforce Inc. led a round in Hugging Face at a $4.5 billion valuation. Alphabet Inc. and Amazon.com Inc. invested billions in OpenAI rival Anthropic. And Nvidia Corp. seemed to back almost every AI startup of note. .The net effect is that many of the most promising AI startups now depend heavily on the old guard of dominant tech companies for their financing and infrastructure needs. That dynamic is starting to draw the attention of regulators..Microsoft's partnership with OpenAI is facing fresh scrutiny from UK and US competition regulators. In the US, the Federal Trade Commission has been tasked by the Biden administration with promoting "a fair, open, and competitive AI ecosystem." The agency has previously requested public comment about whether large cloud computing contracts are anti-competitive.."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," said Ngor Luong, senior research analyst who focuses on AI investment trends at Georgetown University's Center for Security and Emerging Technology. .For AI companies, these deals with Big Tech can serve as a vital lifeline. It's extremely costly and computationally intensive to build large language models, the technology that underpins AI chatbots like ChatGPT. Large tech companies are in the small camp of businesses with the infrastructure and funds to support these efforts..For Big Tech companies, these deals can serve as a means to cement their grip on a competitive and rapidly evolving market after some were caught off guard by the massive success of OpenAI's ChatGPT a year ago. These partnerships can also help tech giants bolster demand for their products, whether it's the chips sold by Nvidia or cloud-computing services from Microsoft, Google and Amazon. .Read more: Private education soars as South Africa's public system falters, boosting stocks of Curro and Advtech.In a blog post this month, Nvidia said it has made "more than two dozen investments" this year. "These partnerships stimulate joint innovation, enhance the NVIDIA platform and expand the ecosystem," the company said..In addition to OpenAI, Microsoft has invested in Inflection AI and Adept, among other billion-dollar AI startups, but these deals are much smaller than the $13 billion it has committed so far to the ChatGPT-maker. .Microsoft's unique relationship with OpenAI was put on full display in November when Chief Executive Officer Sam Altman was briefly ousted from the startup. Microsoft CEO Satya Nadella played a key role, along with other investors, in forcing the board to reverse its decision. At one point Microsoft said it would hire Altman and his OpenAI colleagues to form a new Microsoft AI unit..In response to regulators' concerns, Microsoft emphasized that it doesn't own a traditional stake in OpenAI. "It is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to a share of profit distributions," the company said last week. .While Microsoft, Amazon and Alphabet have all been very active this year in backing AI startups, two other Big Tech companies have largely stayed away from such deals: Apple Corp. and Meta Platforms Inc. .Apple Inc. has built its own large language model called Ajax and rolled out an internal chatbot dubbed "Apple GPT." Meta, meanwhile, has an open source large language model and has struck partnerships with other Big Tech companies, including Microsoft and Amazon..Read also:.🔒Musk's xAI: A Billion-Dollar gamble against big tech's AI supremacyTech giants revolutionize hearing aids, breaking cost and stigma barriers🔒Nuclear Fusion breakthrough sparks optimism and investments for clean energy future.© 2023 Bloomberg L.P.

Big Tech’s dominance in AI sparks regulatory scrutiny as startups lean on giants for lifelines

Related Stories

"BEE pits black against white": The trailblazer who says empowerment got it wrong — Sam Montši

How Leon Kluge, SA’s unofficial ambassador for Cape flora, struck gold at Chelsea for the third time

Trump's US health aid overhaul meets reality in Mozambique

Viv Vermaak: Phala Phala, games of steal and plunder