Biden declares war on innovation

Last week, the Department of Justice and the Federal Trade Commission agreed to share responsibilities for investigating three U.S. companies that are at the forefront of developing artificial intelligence technology. The Department of Justice will take over the investigation into possible antitrust violations by Nvidia. The FTC will investigate the relationship between Microsoft and OpenAI and whether business transactions between the two companies are anticompetitive and signal illegal monopolizing behavior.

The federal government is reportedly concerned about the three companies’ large market shares in the rapidly growing artificial intelligence industry. But that may not be the real reason for the investigations and widespread publicity about the division of responsibility between the Justice Department and the FTC. Antitrust law clearly states that high market dominance achieved through innovation cannot be considered illegal monopolization.

The foundation of the American system of free market capitalism is to promote innovation, creative destruction, and a vibrant economy in which productivity continues to grow. US antitrust law focuses primarily on economic efficiency and consumer welfare. Artificial intelligence has the potential to increase the U.S. economic growth rate by up to 1.5% annually for a decade or more. Such growth would be profoundly positive in the context of the current GDP growth trend of around 1.5% to 2%. In short, artificial intelligence could almost double the rate of US GDP growth.

It is important to note that Nvidia has achieved dominance in the accelerated computing semiconductor market through innovation. Nvidia engineers realized that their gaming graphics processing chips, or GPUs, could also be used to accelerate data processing speeds. Nvidia has aggressively increased its R&D budget for accelerated computing. When the field of artificial intelligence suddenly emerged, Nvidia was ready. Its GPUs far outperformed competitors’ semiconductors in creating the large language models necessary for artificial intelligence. Today, Nvidia has approximately 92% of the AI-accelerated computing market share, all thanks to innovations that are completely legal under US antitrust law. And completely positive from the point of view of social benefits. Importantly, Nvidia continues to invest aggressively in research and development as AMD and Intel, as well as tech giants, develop chips to compete with Nvidia.

Free market capitalism works. It is no different in the case of Microsoft and OpenAI. Both are aggressively investing in artificial intelligence. Both companies have achieved strong market positions in artificial intelligence through innovation. Moreover, both companies are not monopolies. They do not have a dominant position in the market. Alphabet-Google is a dangerous competitor. Meta is a strong competitor and offers an open source AI platform to the public.

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The market also claims that Apple, Amazon and Tesla are investing heavily in AI platforms. The competition is fierce. The United States is the world leader in artificial intelligence due to the principles of free market capitalism. Unfortunately, President Joe Biden’s Justice Department and FTC are run by liberals who want to emulate the European Union’s economic regulatory policies, which are a large part of the reason the EU is almost entirely absent from artificial intelligence and broader high-tech markets. The USA innovates. The EU regulates and stifles innovation.

Biden progressives do not believe in the invisible hand of Adam Smith. They bow to the administrative state. Biden’s progressives believe they can manage an economy worth nearly $30 trillion. They are wrong both economically and legally. The market shrugs at the increasing stupidity. The antitrust news had no impact on Nvidia and Microsoft stock prices.

The writer owns shares in Nvidia and Microsoft.

James Rogan is a former US Foreign Service officer who later worked in finance and law for 30 years. He writes a note every day in markets, politics and society.