Nvidia’s AI Leadership Faces Antitrust Scrutiny from Regulators

US authorities are looking into Nvidia’s 80% market share in AI chips, which could be a sign of antitrust issues.

US trade authorities are stepping in early to see if a small group of big tech companies, like Nvidia, are using their power to take over the growing market for artificial intelligence.

People who know about the situation say that the antitrust section of the Justice Department has already called Nvidia to ask about the terms of its contracts and partnerships. Nvidia has an estimated 80% market share in AI chips.

People familiar with the matter say that the investigation is still in its early stages and that government lawyers have not yet served Nvidia with a subpoena for internal papers. After a news story said that the company had gotten a subpoena, it said last week that it hadn’t. The department could send out a subpoena in the next few months if it decides that a fuller review is needed, the sources said.

This year, the Federal Trade Commission started its own investigation into the investments that Microsoft, Amazon.com, and Alphabet, the company that owns Google, have made in the most interesting AI startups. The FTC is currently investigating whether the tech giants got any special benefits over rivals by investing billions of dollars in the companies making the most popular generative AI products. The investigation is still going on.

The Justice Department and FTC are eager to police AI while it is still in its early stages. This is different from how they dealt with Google, Facebook, and other companies before they became huge internet companies.

In the past, the government was hesitant to get involved in tech markets that were growing quickly and whose goods people liked. Both liberal and conservative foes have said that the government’s lack of involvement over the past 20 years has given a few large tech companies too much power. The backlash led to a change in how antitrust laws are enforced, which is now being embraced by the Biden government.

A small group of the biggest tech companies are vying for market share in AI, which needs huge investments in capital that smaller companies can’t make. Antitrust officials say there could be a tipping point when big companies control important parts of AI, like how search engines and social networks grew.

Concerns About Generative AI Monopolies

Lina Khan, Chair of the FTC, is afraid that big tech companies could get new monopolies in the growing field of generative AI. Generative AI systems can talk, make media, write code, and do other things that humans can do. In May, Jonathan Kanter, who is in charge of antitrust at the Justice Department, said that the AI market is open in the same way that other tech industries have been, with one company becoming the leader.

The AI models made by OpenAI and others can’t be trained without Nvidia’s chips. The company is being looked at more closely by trade authorities around the world, from the European Union and the U.K. to China and South Korea. This is why the department is looking into it. Last year, competition officials searched its offices in France. In a statement with the SEC in August, Nvidia said that different regulators have asked for information about its sales, how it distributes its limited chip supplies, and its partnerships with AI companies.

It’s not illegal for Nvidia to have a big part of the market. Customers found that the company’s specialized chips worked really well for AI. These chips were once mostly used for computer games graphics and are now also used by computers that handle bitcoin transactions.

To file an antitrust claim, the government would have to show that Nvidia did things, like using tight contract terms, that hurt competition and kept or grew its market power without reason. Some of Nvidia’s competitors say that the company has taken advantage of its huge market share in AI computing.

The CEO of AI chip company SambaNova Systems, Rodrigo Liang, said that there was more competition and a lot of demand for chips other than Nvidia. But he also said that some users were afraid that Nvidia might not sell its AI chips, which are called GPUs, to people who look at other options like his.

A representative for Nvidia said that the company does not need exclusivity and supports all of its partners and users. Because Nvidia’s chips are used in so many AI projects, which companies get them can have an effect on how well they do. For a long time, Nvidia’s most powerful AI chips have been hard to get. Customers have had to wait months for their orders to be filled. The company says that there will be more demand than supply for its next-generation chips, which are code-named Blackwell and will begin shipping in a few months.

Nvidia’s Response to Antitrust Concerns

Nvidia said in a statement that its products’ high AI computing performance is what makes them stand out in the market. The company also said it would be happy to talk to the government about how it runs its business.

Antitrust officials can question deals that take away too much competition from a market, in addition to looking closely at how companies do business. Over the years, the government took a long time to question the deals that made tech companies what they are today. To give you an example, the FTC let Facebook buy Instagram in 2012.

Nvidia’s deal to buy Run:ai in April is being looked into by the Justice Department. Run:ai is a company that makes software that organizes and streamlines the use of groups of AI chips to make them work better.

People familiar with the case say that the department started looking into Nvidia’s deal for Run:ai after it reached a deal with the FTC on how the two agencies should keep an eye on AI companies. Politico first claimed that the Run:ai deal was being looked into.

It could take months or even years for the agencies to finish their investigations into AI companies. It can take up to a year to look into a merger, and it often takes longer to look into a company’s behaviour in general.