IWhen a company triples its value in just a few months, as computer chip company Nvidia has done, investors take notice. But so do regulators, because they know from experience how monopolies engage in illegal anticompetitive behavior that crushes competitors and manipulates the market to expand their dominance. The U.S. Justice Department (as well as other competition authorities and technology watchers) suspects that Nvidia has used such tactics to entrench its chip monopoly, and last month it was reported that the Justice Department was opening an antitrust case. investigationIt’s about time.
Before the pandemic, few outside of gaming enthusiasts (whose high-end PCs and gaming consoles are built with high-capacity Nvidia chips) had heard of the company. But thanks to the rise of generative AI, Nvidia has become one of the most fastest growing companies of always, and their chips have promoted Every major milestone in AI, including the development of OpenAI’s ChatGPT, which has two thirds of the AI business tools market.
Because the immense calculations underpinning generative AI require tens, if not hundreds of thousands, of extremely powerful chips in massive data centers — calculations at which Nvidia’s graphics processing units (GPUs) excel — the company’s market capitalization has skyrocketed. More than 30 times In just five years, briefly becoming the The most valuable company in the world earlier this summer, eclipsing Microsoft and Apple.
This is all great for Nvidia investors riding the AI wave, though recent stock market volatility suggests the euphoria may be overdone. Nvidia shouldn’t be stigmatized for making the most of being in the right place at the right time, but how a company like Nvidia grows does matter. If a company uses unfair practices to drive out competitors, raise prices, and deepen the advantage surrounding its monopoly, that’s not good for its customers, fair competition, or the general public.
Like other tech giants, Nvidia is totally focused on dominating every market it enters. It sells 88% of the world GPU, and has made its way to dominance in AI as well, which some estimates say will be a trillion dollar market In just a few years, some analysts estimate that Nvidia already controls 98% of the market for data center GPUs.
But like the rest of the big tech companies, albeit with less scrutiny, Nvidia has risen to the top by leveraging its market dominance to retain customers and marginalize competitors. It offers everything its customers need — chips, software and network services. as a packageand Prohibits such companies from doing business with their competitorsSimilar tactics, such as bundling, tying, and self-preferencing, have already led to ongoing and unresolved antitrust actions in multiple jurisdictions against companies such as Amazon, Appleand Googleand Nvidia could be next; the company is already facing Antitrust control in Francehe The European Union and the United Kingdom.
With its control over a limited supply of in-demand chips, Nvidia has become the gatekeeper of progress. It has the power to decide which AI development can continue (mostly the tech giants) and who is left without resources (smaller competitors). Big deals with companies like Meta, which buy dozens or even more chips, Hundreds of thousands of chips at a timeThey are marginalizing the independents entrepreneurs and Researchers that simply can’t compete. And even by catering to smaller customers, Nvidia favors companies in which it has a stake.
Everyone benefits from healthy competition in the AI chip field. Fair access to advanced semiconductors will help ensure that the potential benefits of AI are shared broadly, not restricted to a small elite. It will give smaller, more agile companies a fair chance, ensuring that AI innovation doesn’t happen on Big Tech’s terms. And it will increase choice and reduce costs for businesses, resulting in more affordable products and services for consumers. And by reducing our dependence on one all-powerful producer, it will strengthen our resilience to supply chain disruptions and technological failures, such as the Covid-19 pandemic or the recent CrowdStrike/Microsoft computing service outage.
And there’s another reason to be wary of a hyper-concentrated chip market: AI regulationWhether it’s the EU AI Act or the White House executive order on AI, it’s slowly emerging, putting Nvidia, which decides who gets chips for what, in a quasi-regulatory role. That’s not the way things should work; regulatory policy is a public function, and a for-profit company, because of its sheer size, shouldn’t be allowed to fill the void. But Nvidia likes it that way, and has Lobbying intensified to try to maintain its de facto control of global AI.
Nvidia’s spectacular rise has surprised many, but while it may be the “new kid on the block” in Big Tech, that doesn’t mean regulators should give it free rein to abuse its monopoly power. By engaging in practices that lock in customers and exclude competitors, Nvidia is trying to manipulate the AI market in a way that favors its interests while undermining the public interest. Competition authorities around the world were too slow to stop today’s tech giants from dominating Web 2.0. They can’t afford to repeat the same mistake with Nvidia and AI.