The artificial intelligence (AI) and cloud computing landscape is evolving rapidly. A new report from Federal Trade Commission (FTC) has raised concerns about monopolistic practices and made waves throughout the tech industry. This report, which examines partnerships between major cloud service providers and generative AI modelers like OpenAI and Anthropic, raises valid questions. However, let’s take a step back and explore whether these collaborations are stifling competition or demonstrating the inherent resilience and adaptability of the AI sector.

The FTC's report highlights a growing and valid concern about how these partnerships could limit market access for smaller, independent AI developers. Microsoft, Amazon, Alphabet and other major players have forged deep financial ties with AI startups, giving them significant control over resources and market dynamics. One example is Microsoft’s massive $13.75 billion investment in AI, including OpenAI. Similarly, Amazon’s billion-dollar investment in Anthropic (an AI security and research company) puts Amazon in a leading position as Anthropic's primary cloud provider, reinforcing Amazon's dominance in the sector.

Market Dynamics: Cloud Giant and AI Partnership

Very few AI system being built today do not involve Microsoft, Google, or AWS cloud services. The explosive growth in their revenue speaks to their influence. At first glance, these moves might raise concerns about exclusivity. The FTC highlighted how these partnerships allow the big cloud service providers to extract significant concessions from developers. This can lock users into ecosystems that favor the big players while sidelining smaller, innovative companies that could drive AI progress.

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Based on my work with smaller AI companies, they are less concerned about running out of money or the market changing. Their biggest fear is that the more prominent players will copy what they have created or, more likely, sue them out of business. This is not something I learned during their pitch presentations—which I see about three times a week—but rather over a beer afterward. Side note: Alcohol is an astonishingly effective truth serum for tech executives.

The innovation ecosystem and the role of smaller companies

The AI landscape is characterized by rapid innovation and diversification, largely driven by the partnerships the FTC is examining. While it’s true that large tech companies have a lot of influence, it’s equally important to note that countless startups and smaller developers continue to emerge and drive competition in unexpected ways.

Yes, the new companies are disruptive—a word I hate when it comes to describing tech companies. But think about how open source community has flourished alongside corporate partnerships. Smaller companies and independent developers often follow the lead of market leaders but build solutions that address niche needs, further enriching the AI market. Often this is done for free. I am often amazed at how much open technology is created by volunteers. The big players are also involved, and their developers also contribute significant efforts. A $500,000 investment is almost commonplace these days.

Fears of a monopoly will fade as these smaller players innovate and differentiate themselves. This is not to downplay the challenges faced by big companies, but to make clear that the barriers to entry in the AI market are lower than in many other technology sectors. Moreover, regulators are not blind to these developments. The FTC’s report serves as both a warning and a guide for policymakers. Around the world, authorities such as the UK’s Competition and Markets Authority (CMA) closely scrutinise such partnerships, seeking to balance innovation with fair competition. While the CMA has cleared several high-profile deals, including those involving Amazon and Microsoft, its latest work represents a commitment to promoting an open market.

In fact, the CMA's latest assessment of Alphabet and Anthropic that their partnership does not constitute a merger that would significantly harm competition. This not only indicates a comprehensive understanding of the technology landscape, but also supports the view that there is opportunity for competition despite the large partnerships. A vigilant regulatory environment should encourage innovation rather than hinder it. Review promotes compliance and inspires organizations to explore new ideas and options to stand out in the marketplace.

A thriving future for AI

Instead of asking: “Will AI become a monopoly?” we should be asking: “How can we ensure healthy competition in a thriving space?” A few key players dominate the landscape, but the excitement of competition has historically driven technology forward. We can stimulate a more dynamic market by embracing diversity in AI development. This approach will weed out weaker players. In five years, I may be wrong, but based on past patterns, I believe this is the direction we are heading.

Let us also reflect on the nature of technological development. The rise of cloud computing and AI has been exponential and will continue to flourish, even though cloud-based AI systems are significantly more expensive than private servers. The availability of cloud services allows startups to leverage powerful computing capabilities without large upfront investments. This democratization of technology means that a small business in a garage, with the right idea and execution, can compete against much larger units.

Additionally, new entrants to the AI sector can leverage the data and knowledge generated through these partnerships to refine their offerings. The notion that a handful of companies could monopolize such a rapidly evolving field is, at best, simplistic. The development of AI stands as a testament to the innovative spirit that thrives, even in the presence of corporate giants.

Cautious Optimism

I always get some criticism on social media: “Linthicum protects its cloud provider peers!” or “Who’s paying you, Dave?” If you read my articles here or watch my YouTube channels, you know that nothing could be further from the truth. It’s important to consider the potential for bad actors, but taking drastic action against companies that dominate AI is premature, as it could lead to unintended consequences.

We need to look through a more nuanced lens. Partnerships between leading vendors and AI developers offer opportunities for growth and innovation when managed effectively. Even if they pose risks to competition, should the government start intervening? I’m not sure it will ever help, except in exceptionally difficult circumstances, like breaking up Ma Bell in the 1980s.

In an era of technological sophistication, it is important to maintain an environment that fosters competition. However, we must also leverage the resources and expertise of larger companies. Some may foresee a future dominated by a few tech giants, but the AI landscape is too vibrant and expansive to be limited by just a handful of companies. One day I may regret writing this article, but for now, this is my story, and I am sticking to it.