Key Summary
- Microsoft’s Investment in Mistral AI: Microsoft’s $16.3 million deal with Mistral AI, a 10-month-old startup, aims to unlock new commercial opportunities and develop AI in global markets, leveraging France’s growing tech sector spurred by President Macron’s policies.
- Surge in AI Investments: Major tech companies like Google, Amazon, and Microsoft have heavily invested in AI, with Google alone boasting $30.7 billion in 2023. This surge reflects the growing importance of AI in various industries.
- Regulatory Implications: Microsoft’s investment, coupled with Nvidia’s support for Mistral AI and French lobbying for looser AI regulations in the EU, raises concerns among EU lawmakers about potential monopolistic practices and control over the international AI market.
- EU Response and Solutions: The EU has launched an investigation into Microsoft’s relationship with AI giants to ensure compliance with competition rules. To protect European AI companies, policymakers may prioritize transparency, economic incentives, and preferential policies for AI development.
- Future Outlook: The outcome of the investigation could shape the EU’s stance on AI regulation and influence the centralization of AI operations within the union. Whether France emerges as a leader in AI or startups are dissuaded from operating within the EU hinges on the investigation’s findings and subsequent regulatory actions.
Monday, February 26th, Microsoft announced a deal with a young AI startup Mistral AI. Mistral AI, a 10 month old company, agreed to a $16.3 million dollar deal that would help them unlock new commercial opportunities and it would allow Microsoft to help develop AI in global markets. The French technology sector has been growing in recent years, part due to President Macron’s embracing of the industry. This provides an ideal investment opportunity for Microsoft as Macron is committed to promoting tech and AI progress. Microsoft isn’t the only major technology company investing in AI though. In 2023 Google boasted $30.7 billion in AI investment, Amazon had $10 billion invested and Microsoft had another $10 billion. Although these numbers don’t show up to date measures, it’s important to understand that technology companies investing in AI has shown a surge in the last few years. Further this investment comes at a time where Nvidia has become the third US stock to close above $2 trillion, who happens to be one of Mistral AI’s funders. The combination of Mistral and the French Government lobbying for looser AI regulations on the European Union’s AI act, coupled with Microsoft’s sudden investment into Mistral, which the French government claims they knew nothing about, has rubbed EU lawmakers the wrong way. Microsoft’s investment was supposed to be seen as the company’s commitment to global markets, but the possibility of Microsoft using Mistral as a lobbying agency for the AI Act has framed the investment in a way of controlling the international AI market.
The AI industry has skyrocketed in potential value since the Covid-19 pandemic. The emergence of Chat GPT through OpenAI paved the way for other AI startups. However, OpenAI is headquertered in San Francisco, where there are significantly less regulations than around Europe. Europe was predicted to be the leader in AI regulation, but this prediction failed to include Brexit as a major factor in AI development. The United Kingdom, prior to its exit of the European Union,was and still is the leader in AI readiness. The UK’s exit provided a window of opportunity that France took advantage of. This allowed President Macron to pass preferable policies to encourage AI developments to headquarter in France. Since, Finland and France have led the charge in AI preparedness within the EU. Mistral AI opened up 11 months ago, and despite being a brand new startup, they have already emerged as one of the largest competitors of Open AI’s GPT-4. GPT-4 is the fourth generation of Open AI’s large language model system, that mimics humanlike reasoning. This system was launched in 2023 and was made available to the public through the usage of OpenAI’s chatbot, ChatGPT. Microsoft is OpenAI’s largest investor, having a 49% ownership stake, and boasting a $10 billion dollar investment. Mistral Large, the rival system of GPT-4, which is available through it’s operating system Le Chat, has, according to its developers, performed almost as well as OpenAI’s GPT-4. The mix of Microsoft’s investment into key AI companies, the future high potential of the AI industry, and Microsoft’s alleged lobbying through Mistral AI in the AI Act are the ingredients as to why the EU will be taking a very close look into the $16.3 million dollar investment.
The large investment from Microsoft, does not have any major direct impact on consumers, yet. However, it will have regulatory implications. Europe was already expected to be the front leader in AI regulation, and with antitrust concerns, it seems even more predictable that European officials will prioritize regulating AI development and financial fair play within the industry. The EU announced that there would be an investigation into whether Microsoft’s relationship with the two AI giants was in kahoots with EU competition rules. The results of this investigation could impact how big tech companies invest in European AI start-ups or whether these start-ups decide to move to the United States due to more lax regulation. However, if the findings are inconclusive or show evidence that Microsoft did not break European competition rules, than it would highlight Microsoft’s dominance in AI development and could eventually lead to concerns over monopolization in the AI industry. Although this is an extrapolation, it would have consequences on consumers if ChatGPT and Le Chat remained the dominant chatbots.
The EU has taken appropriate actions in the wake of this investment, as to protect other European AI companies. In the current stage of the investigation, there are no apparent major risks at play outside of the monopolist character of the tech relationships. Understanding that the EU will be the forerunner in AI regulation, EU officials and lawmakers should continue to prioritize the protection of European born tech and AI companies. To accomplish this European lawmakers should look to bridge transparency with member countries’ economic relations. In the case of Microsoft and Mistral, there was a clear asymmetric distribution of information between the French Government, Microsoft, and Mistral AI. Mandating notice of large scale investments or mergers, specifically in the tech and AI industries, to the EU member states respective governments could be a policy undertaken in response to this concern. Secondly, the issue of retaining AI companies in Europe is also important to take into consideration with regards to increasing red tape. Tax exemptions and other economic incentives could be instituted for this issue.
The high value and emerging AI industry is one to keep an eye on. This European investigation could catapult France into being the leader of AI within the EU, or it could dissuade AI startups from centralizing operations within the union. Although Mistral AI and OpenAI are the two rivals between chatbots, the AI scene is rapidly changing. If the EU begins enacting preferential policies towards AI development, they have a preferred environment for AI developers to bring the industry over. However, we forecast that the ruling of the investigation will provide evidence that competition rules were broken, especially with Europe’s already high antitrust regulations.
Author: Tucker Henry
