Potential Concentration of AI Market Due to Dominance of Big Tech’s Cloud Oligopoly

Competition authorities in the US and UK are investigating the close relationships between generative AI firms and their wealthy tech giant backers. The US Federal Trade Commission (FTC) is conducting a general probe into big tech firms’ AI investments and partnerships, while the UK Competition and Markets Authority (CMA) is specifically investigating Microsoft’s partnership with OpenAI. While the debate may seem technical, it is reshaping the future of the AI industry and its role in society.

Tech giants such as Microsoft, Alphabet, and Amazon are investing billions in AI startups to gain influence over the sector. Microsoft, for example, owns AI pioneer OpenAI and backs other AI companies through its investment arm M12. Google and Amazon heavily fund OpenAI’s main rival Anthropic, and they have also invested billions in other AI businesses.

The dominance of tech giants in the cloud computing sector further empowers their control over the AI industry. Cloud computing allows users to access data and applications online, and it is the main infrastructure for AI systems. Amazon, Microsoft, and Google dominate the cloud computing market, controlling 66% of it. This allows them to shape which AI systems are promoted and used by customers, favoring systems they own or have investments in.

The deep pockets of these companies also enable them to offer subsidies and deals that competitors cannot match, making it difficult for customers to switch providers despite escalating costs. Additionally, these tech giants can acquire the hardware needed to power AI tools at a scale that smaller firms cannot match.

The risks of this oligopoly are both evident and less obvious. Users of big tech cloud infrastructure can become trapped with increasing prices and limited alternatives. Additionally, the immense energy consumption of data centers powering cloud computing and AI poses a risk to society and the economy, as these giants compete for finite energy resources. In the event of a prolonged outage or cyber-attack on one of these providers, it could have devastating effects on the whole economy.

There is an increasing call for “data sovereignty” to ensure that nations have control over their own data and can benefit from it. With tech giants holding and processing vast amounts of data, they have an advantage in training their AI tools.

Recent interventions by regulators, such as the CMA, FTC, and EU, are seen as insufficient to address these concerns. The close relationship between central governments and the AI industry makes it unlikely for regulators to take substantial action. Critics argue that governments move too slowly to keep up with technology, but regulators have been setting stricter rules governing the tech space.

While fines imposed on tech giants may not be enough to deter their behavior, addressing the underlying concerns about the use of AI requires a redistribution of power. AI technology already has devastating effects on society, with issues such as deepfake pornography, faulty AI systems used in government processes, and unjust denial of medical claims by health insurance firms.

Addressing the lack of competitiveness in the AI industry will not necessarily address the potential harms associated with its use.

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