Microsoft Opens Windows on AI Antitrust Paradox

RPT-BREAKINGVIEWS-Microsoft Opens Windows on AI Antitrust Paradox

The author is a columnist for Reuters Breakingviews. The opinions expressed are his own.

By Jonathan Guilford

NEW YORK, July 10 (Reuters Breakingviews) –AI is trying to avoid government intervention. The quest to build a machine mind that is better than human intelligence could be the next big thing to replace the hyper-consolidated tech landscape that regulators hate. But given that the effort could require spending $1 trillion, the deep pockets of today’s tech giants seem irreplaceable. Their financial weight wields as much influence as anything like the nonvoting board seats Microsoft is giving away MSFT.O and Apple AAPL.O at OpenAI, creators of ChatGPT. This is just a cover for a much larger battle over this difficult paradox.

The release of ChatGPT in November 2022 was a watershed moment. It drove up the value of tech stocks and raised concerns about existential threats to humanity. Alphabet GOOGL.OAmazon.com AMZN.OMeta Platforms META.O and Microsoft alone invested $140 billion in capital expenditures last year, largely thanks to artificial intelligence initiatives.

Giant fund manager BlackRock BLACK N considers multilingual models to be comparable to the Industrial Revolution. And while one Goldman Sachs analyst estimates that mastering AI will require a 13-figure sum, the investment bank’s global head of equity research, Jim Covello, questions whether it will deliver adequate returns. For now, the craze lasts thanks to the recapitalization of OpenAI, Anthropic and others.

The problem is that the software, e-commerce, social media, web search and mobile giants—whose combined market value is nearly $13 trillion—are already facing intense resistance from trust busters around the world. All five companies have been sued by the U.S. Federal Trade Commission or the Justice Department under President Joe Biden. thing against Apple is effectively portrayed as preventing the iPhone maker from dominating whatever smartphone replacement comes next. AI is clearly a leading candidate.

No wonder they use workarounds, no matter how flimsy. Microsoft didn’t “acquire” an AI startup Inflection; hired the company’s employees in exchange for a “license” fee. Amazon did something similar with Adept. Avoiding formalized acquisitions deprives government agencies of their most powerful tool: merger review.

Put simply, these tactics won’t stop antitrust enforcement. OpenAI is nominally independent, but when management tried oust CEO Sam Altman used the threat of moving to Microsoft in November to great effect. The FTC is explore partnership. Microsoft and Apple vacating their board positions with observers, as reported by the Financial Times on Wednesday, is unlikely to allay concerns in Washington.

But the tech giants have charted their course. AI requires vast resources: cash, chips, servers. Microsoft has them, and most others don’t. That solution may be anathema to regulators, but who knows what else is on offer. FTC Chairwoman Lina Khan made a name for herself by denouncing the “antitrust paradox” created by Amazon. Now she must solve an even more complicated conundrum.

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CONTEXT OF NEWS

Microsoft said it will resign from its observer position on the board of OpenAI, the creator of ChatGPT, the Financial Times reported on July 10, citing a letter to the company that said there had been “significant progress” in the composition of the board following an attempt to oust CEO Sam Altman in November.

Apple, which had planned to join OpenAI’s board after the partnership was announced on June 10, will also resign from its seat, the FT reports.

Edited by Jeffrey Goldfarb and Sharon Lam