- Antitrust Investigations: The U.S. Department of Justice and the Federal Trade Commission approved investigations into Microsoft, NVIDIA, and others for potentially using their market dominance to disadvantage smaller AI technology companies.
- Market Dominance and Environmental Concerns: NVIDIA and Microsoft, both major players in AI technology, face scrutiny for potentially creating high entry barriers and their significant energy use in data centers, leading to environmental concerns.
- Investor Impact: Government and environmental challenges may affect the stock prices of Microsoft and NVIDIA, causing investors to reconsider their support, particularly in light of increasing indirect carbon emissions from data center expansion.
The Federal Trade Commission and the United States Department of Justice recently approved a deal allowing investigations against Microsoft, NVIDIA, and other companies for violating antitrust laws. Under the investigation, the U.S. Department of Justice will determine if these companies unfairly use their size and leverage to disadvantage smaller, emerging companies within the AI technology industry.
NVIDIA and Microsoft are the highest-valued companies globally, with NVIDIA recently reaching a market capitalization of $3 trillion, surpassing companies like Apple and Alphabet (Google). While Microsoft has been a key player in the technology industry for many years through their product offerings, NVIDIA saw a surge in value only recently due to growing interest in AI technology. Specifically, NVIDIA specializes in data-accelerated and end-to-end computing platforms that help support various artificial intelligence programs individuals and businesses desire. Additionally, companies like Microsoft have partnered with NVIDIA to produce powerful AI supercomputers backed by large data centers and utilizing graphic processing units for Microsoft technology.
While the collaborations between Microsoft and NVIDIA have been instrumental in advancing accessible AI technology, the U.S. Department of Justice is concerned about the potential for these collaborations to create high barriers to entry. Given the market dominance and financial strength of these companies, they can easily acquire and develop large data centers, a luxury that smaller companies may not be able to afford. This situation could potentially give Microsoft and NVIDIA an unfair advantage over smaller companies, impacting their market position.
While Microsoft and NVIDIA have received backlash from the U.S. government over antitrust concerns, they are also facing pressures related to the energy usage of data centers. Companies use various methods to generate the energy needed to power large data centers. However, many data centers rely on generators that require natural gas and other fossil fuels, creating environmental concerns for many individuals.
According to Microsoft’s sustainability report last month, the company saw a 30.9% increase in indirect carbon emissions due to constructing more data centers and hardware components. Although these emissions might be indirect, the increase suggests that data centers still pose challenges to support sustainability goals, creating problems for companies like Microsoft and NVIDIA that invest heavily in large data centers.
The combination of government and environmental challenges poses significant risks for the stock prices of these companies. As the government fights to ensure fairness within the AI tech industry, investors might be more cautious about supporting companies like Microsoft and NVIDIA. If limitations are imposed, investors might fall back on other drivers, such as ESG factors, to help justify its high value. However, since data centers have created environmental problems for reputable companies like Microsoft, government pressures may influence the sustainability of the stock prices.