Microsoft’s $13 billion (roughly Rs. 1,12,485 crore) investment in OpenAI raises concerns that the tech giant could extend its dominance in cloud computing into the nascent artificial intelligence market, the Federal Trade Commission said in a report released Friday.
The commission said Microsoft’s deal with OpenAI, as well as Amazon.com and Google’s partnerships with AI company Anthropic, raise the risk that AI developers could be “fully acquired” by the tech giants in the future.
In the two-plus years since ChatGPT kicked off a frenzy around generative AI, leading AI startups have turned to large tech firms for support developing the costly and computationally intensive technology. But in its report, the FTC raised concerns that the cloud giants require some of their investments into these startups to be spent on their own products and services. The FTC also said there are risks of consolidating coveted AI talent around these large firms and potential for the companies to gain advantageous data related to chip development, model training and data center construction.
“The FTC’s report sheds light on how partnerships by big tech firms can create lock-in, deprive startups of key AI inputs, and reveal sensitive information that can undermine fair competition,” FTC Chair Lina Khan said in a statement.
The report also noted that at least one of the big tech firms — it didn’t say which — received access to “confidential and potentially sensitive financial performance information” as part of its deal with one of the AI startups, receiving weekly reports about revenue trends and updates about customers.
Additionally, it pointed out that at least one of the agreements provides for a big tech firm to have access to the output from an AI startup’s model —such as the text or other information spit out by a chatbot in response to a user’s prompt. The tech firm planned to use this information, which is often referred to as “synthetic data,” to train its own AI model.
Google, Amazon and Anthropic declined to comment. OpenAI didn’t immediately respond to requests for comment.
“The partnership between Microsoft and OpenAI has enabled one of the most successful AI startups in the world and spurred a wave of unprecedented technology investment and innovation in the industry, creating thousands of new startups in the US and around the world,” said Rima Alaily, Microsoft’s deputy general counsel.
Market Studies
The FTC has the power to open market studies to glean more information about industry trends. The findings can be used to inform future actions. It’s unclear what the agency’s new leadership under the Trump administration will do with the report.
The FTC opened the inquiry last year focusing on the billions of dollars of investments by the world’s cloud-services giants into AI startups. That included Big Tech investments in OpenAI and in Anthropic, a company founded by former OpenAI employees.
The FTC is conducting the inquiry under its so-called 6(b) authority that allows it to issue subpoenas to conduct market studies. The agency generally issues a report on its findings after analyzing the information from companies, though that process can take years to complete.
None of the companies notified US antitrust agencies of the deals ahead of time because of how they were structured.
The FTC said the partnerships between tech and AI could result in dominant tech companies holding “exclusivity rights” to their AI partners’ tools, and it could discourage AI companies from working with multiple tech companies by increasing “switching costs for the AI developer partners.”
Skilled Talent
The report also highlighted concerns the partnerships may have on the market for engineers. “An open question is whether the partnerships may consolidate access to this talent pool in the hands of a limited number of firms,” the report said. The “skills necessary to develop and deploy large-scale generative AI models are relatively rare and may be difficult to acquire outside of working for large AI developers or the hyperscalers themselves.”
The agency took issue with the fact that some of the cloud giants’ investments in these AI companies come back to benefit their own businesses. That’s because significant parts of the investments come in the form of credits to be used to pay for cloud-computing capacity from the AI company’s benefactor, or include stipulations that the AI firm will spend on these cloud services.
For example, much of Microsoft’s largesse toward OpenAI came through credits for Microsoft’s Azure cloud. Calling the practice “circular spending,” the report said this practice helps insulate Microsoft, Amazon and Google from potential losses.
Since 2023, the agency has been investigating whether OpenAI violated consumer protection laws with its popular ChatGPT chatbot. In November, the FTC also opened a broad antitrust investigation into Microsoft that includes its investments into artificial intelligence among other topics.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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