Some of the biggest names in the AI space are about to get more scrutiny from government regulators.

The Federal Trade Commission is set to look into Microsoft’s relationship with OpenAI, while the Justice Department will investigate whether Nvidia violated antitrust law, per reports.

The two agencies spent the past six months in negotiations about how to split up the two probes.

Of course, regulatory scrutiny concerning AI is nothing new for Microsoft. The Redmond, Washington-based giant has had regulators looking at it since news broke of its $10 billion megadeal with OpenAI — in the biggest startup funding round of 2023 in any sector.

Per news reports, the FTC probe will also look into Microsoft’s deal in March with Inflection AI to pay the startup $650 million to license its AI software and hire most of its staff.

The deal — seemingly framed in a way to get around any regulatory hurdles since it is not officially an acquisition — once again showed the tech titan’s insatiable appetite for all things AI.

What could it mean?

While specific details about both investigations remain sparse, the FTC reportedly is looking at both the conduct of Microsoft and OpenAI, while the DOJ will examine the behavior of Nvidia, whose AI chips dominate the market.

The probes could have an impact on AI startups. Both Nvidia and Microsoft have been huge investors in startups in the sector, and both could move away from such deals as regulators look over their deals in the industry.

If that happens, venture funding could hit another lull. In May, companies in the AI sector raised 40% of venture funding for the month with $12.5 billion invested across more than 250 companies, based on an analysis of Crunchbase data.

xAI raised close to half of that amount in a single round.

Related Crunchbase Pro list:

• Rounds Raised By Startups Using AI

Related reading:

• AI Investing Boom Is Not New To Tech Giants (At Least Not Their VC Arms)
• Eye On AI: Microsoft Remains Infatuated With AI Startups, And It’s Not Just Inflection And OpenAI
• Salesforce, Nvidia, Cisco Invest In AI Startup Cohere At $5B Valuation — Report
• Eye On AI: More Regulators Look Into AI Investing

Illustration: Dom Guzman