Alphabet stock traded in the green Wednesday despite a report that has sent shock waves through Silicon Valley and beyond. During this morning’s news cycle, headlines flashed that Google (GOOGL) has attempted to use a government agency against one of its big tech competitors.
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Antitrust scrutiny often follows the group of tech giants known as the Magnificent 7. Now, one of its leaders seems intent on steering the regulatory spotlight toward another.
Google has been accused of antitrust violations multiple times. In 2020, 11 state attorney generals joined the U.S. Department of Justice (DOJ) in filing a lawsuit claiming it had illegally monopolized the search engine market. The company faced similar accusations regarding the advertising technology market in 2023.
Now, the tides may be shifting. Google appears to have seized an opportunity to use the regulatory environment in the booming AI market to its own benefit.
Google is taking action against a Silicon Valley rival
It’s easy to wonder how far companies will go to dominate their industries. Google has proved that it is willing to go to significant lengths to gain an edge over competitors.
Today, The Information reported that Google asked the U.S. Federal Trade Commission (FTC), a regulatory agency dedicated to promoting economic competition and protecting consumers, to kill an exclusive deal that Microsoft holds with OpenAI.
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This deal in question is an agreement between OpenAI and Microsoft, which owns a sizable stake in the artificial intelligence (AI) research organization. Under it, any user seeking to access OpenAI’s large language models (LLMs) must do so through Microsoft servers. Given the popularity of models such as ChatGPT and image generator DALL·E, this agreement is essential for Microsoft.
According to the report, Google’s request is the result of a probe that the FTC began into Microsoft’s cloud computing business last month. The government agency began investigating the tech leader's alleged anticompetitive practices on the grounds that they could be jeopardizing the market for competitors.
As part of the probe, the FTC asked several leading tech companies if they saw Microsoft’s agreement with OpenAI as “preventing them from competing in the burgeoning artificial intelligence market.”
Apparently, from Google’s perspective, the answer to that question is yes. According to The Information’s sources, its leaders consider the deal unfair, as it prevents them from hosting OpenAI’s models, barring them from a lucrative market.
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A quick look at the numbers reveals why Microsoft would want to host OpenAI’s models exclusively and why Google would want to stop it. As Ars Technica reports, citing data from The Information:
“In 2024 alone, Microsoft generated about $1 billion from reselling OpenAI's large language models (LLMs)," The Information reported, while rivals were stuck paying to train staff to move data to Microsoft servers if their customers wanted access to OpenAI technology. For one customer, Intuit, "it cost millions monthly to access OpenAI models on Microsoft's servers.”
If the cost for other customers across the industry is similarly high, other companies may echo Google’s claims that the FTC should block Microsoft’s exclusive deal.
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When a leader makes a statement, it is common for others to follow their example, especially when it could lead to them saving money.
Killing this deal could upend Microsoft stock
Given the significant profit Microsoft generated from its partnership with OpenAI in just the past year, killing this deal would be a major blow to MSFT.
The blue-chip tech stock has enjoyed solid growth, with gains of 21% this year. However, a number of Magnificent 7 stocks, including Google, Apple, and Nvidia, have outperformed it.
On top of that, Microsoft may be losing ground to Google in other areas as well. As TheStreet Pro’s Chris Versace notes, “Data from Statcounter shows Google clawed back global search engine market share from Microsoft (MSFT).”
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Now, Microsoft stands to lose the highly lucrative edge that it has held over competitors. Few companies have done more to help usher in the AI revolution than OpenAI, whose models remain extremely popular and are likely to continue helping drive industry growth.
Microsoft has benefited significantly from its exclusive relationship with the tech newcomer. However, it is clear that other Silicon Valley leaders want a piece of this valuable company, and now, the FTC has afforded them an ideal opportunity to pursue it.
For now, it is unclear whether the FTC will move forward with challenging Microsoft’s OpenAI deal.
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