Cloud Dominance in AI Raises Concerns Over Competition and Control

When engaging with advanced artificial intelligence (AI) chatbots like Google's Bard or OpenAI's ChatGPT, users are interacting with a culmination of engineering talent, extensive training data, and powerful semiconductor chips. However, the fourth key ingredient in this mix is becoming increasingly crucial: cloud platforms.

Cloud services are now playing a central role in the AI industry, aggregating computing capacity, providing online storage, and offering essential resources for AI companies. This development is shaping the dynamics of the broader AI landscape and placing cloud companies at the forefront of transformative technology.

While the cloud market is expansive, a handful of major players dominate it, including Amazon, Microsoft, and Google. Policymakers and industry critics are sounding alarms over the potential anti-competitive influence of Big Tech's power in the cloud markets, particularly concerning the future trajectory of AI.

Massachusetts Democratic Sen. Elizabeth Warren expressed deep concerns: "Without commonsense regulation, those companies will entrench their dominance over AI, crush competitors, and put consumer privacy and safety, innovation, and national security at risk. We must protect competition in this critical industry."

As AI's share of total cloud spending is anticipated to grow substantially, regulatory scrutiny is increasing in the United States and globally. Concerns revolve around potential anti-competitive practices, exploitative contract terms, and the overarching influence these major players may exert over the development of AI.

Governments, including the Federal Trade Commission (FTC) in the United States, have highlighted the need to ensure fair competition in cloud markets. President Joe Biden's executive order also addressed risks associated with dominant firms' control over key assets such as semiconductors, computing power, cloud storage, and data.

The concentration of the cloud market has led to exclusive agreements between AI companies and cloud providers, raising potential competition concerns. The top three cloud AI providers—Amazon, Microsoft, and Google—hold a significant lead, followed by smaller players like IBM and Oracle.

Exclusive licencing agreements, subsidised cloud credits, and potential ownership stakes in influential AI startups have been scrutinised. Policymakers fear these practices could result in inflated pricing, anti-competitive collusion, and hindered innovation, ultimately influencing what it costs to use AI services and the types of products that reach the market.

While cloud providers argue that the market is competitive and benefits the U.S. economy, concerns persist about potential abuses of power, exploitative practices, and their impact on AI development. Regulatory bodies, including the FTC, continue to scrutinise the cloud industry, emphasising the need for fair competition and an open market for AI development. As AI's prominence grows, the influence of cloud companies on the industry is poised to remain a focal point of regulatory attention.