September 5 2024
Dear Assistant Attorney General Kanter.
Competition is key to a thriving U.S. economy and faster economic growth. This is particularly true in the semiconductor market, which will drive future advances in artificial intelligence (AI) and other tech breakthroughs — the reason Congress provided $52.7 billion in support for the industry in the CHIPS and Science Act.
This is why I welcome the reports that the Department of Justice (DOJ) has opened an antitrust investigation into Nvidia, whose blockbuster growth has made it one of the world's largest companies. While this growth has been primarily driven by the recent AI boom, it has been supercharged by Nvidia's use of anticompetitive tactics that have choked off competition and chilled innovation. I am pleased that the DOJ has joined authorities in other countries, such as the United Kingdom and the European Union, in investigating Nvidia's conduct.
Until recently, Nvidia was a relatively niche provider of gaming chips, but as a “prime beneficiary of the Al frenzy,” it has seen its market capitalization increase by 250% between November 2021 and May 2024. The money involved is vast, and Big Tech is spending most of it: Microsoft and Meta spent a combined $9 billion on Nvidia's chips last year alone. Amazon purchased as many as 50,000 chips in 2023. And Google plans to pour nearly $40 billion into AI this year much of it on Nvidia's products and services.
As a result of this spending, Nvidia now controls an estimated 90% of the market for high-end AI chips and 98% of the lucrative and growing data center graphics processing units (GPUS) market. Its hardware has been the underpinning of almost every AI milestone, including the development and deployment of OpenAl's ChatGPT-4 and other models. Market power like that means the company decides who gets chips from its limited supply and how much they pay, with some experts theorizing that Nvidia has been making a 1000% profit through the retail price of some of its chips. This has effectively made Nvidia the gatekeeper for the world's AI future.
But in carrying out this responsibility, Nvidia has shown that it is not committed to fair play. The company locks customers in by bundling products, software, and services a practice that has already triggered antitrust scrutiny in France-resulting in Nvidia's own programming software being the only system that is fully compatible with its chips. In a move that was ultimately blocked by the Federal Trade Commission, Nvidia has attempted to further raise barriers to entry by acquiring Arm Limited, the developer of essential chip architecture. If the deal had gone through, experts say Nvidia would have gained control over a software architecture that most of the industry relies on. As Nvidia cements its dominance, venture funders are investing less in companies attempting to build competing chips. Indeed, the number of U.S. venture funding deals for Al chips fell approximately 80% between 2022 and 2023.
The insatiable hunger of gargantuan Big Tech companies for Nvidia chips, along with the company's opaque and preferential allocation of them, are starving startup companies of the infrastructure they need to do business and crowding academic AI researchers out of the field. Allowing a single company so much influence over AI research, development, and monetization poses dire economic risks. Competition powers a virtuous cycle of rapid innovation by impelling each market participant to create the best products. It creates jobs and generates tax revenue. It reduces the need for regulation by giving the market a role in keeping aspiring monopolists in check. It reduces costs for companies by giving them a choice of suppliers.
Without the intervention of U.S. regulators, the prospects of restoring competition in the semiconductor market are bleak. They will only grow bleaker as Nvidia approaches 100% ownership of the market, and as it begins pouring money into lobbying alongside the conventional Big Tech players to shape the contours of AI regulation and lock in its advantage. I thank you for your leadership and support efforts to undertake a comprehensive and fair investigation into Nvidia.
Sincerely,
Elizabeth Warren
United States Senator
Leave a Reply