Microsoft's AI Investment Cleared by UK Regulator, Boosts Strategic Moves in AI Market

The UK Competition and Markets Authority (CMA) has granted approval for Microsoft’s investment in Inflection AI. The watchdog announced that the deal does not necessitate a deeper antitrust investigation, effectively green-lighting the transaction.

In March, Microsoft agreed to invest $650 million in Inflection AI, an AI startup, to gain access to its software. Additionally, Microsoft declared the hiring of Inflection AI’s co-founders, Mustafa Suleyman and Karén Simonyan, along with a majority of the company’s workforce. At the time, Inflection AI was valued at approximately $4 billion. Industry insiders viewed Microsoft's move as a strategic acquisition at a relatively low cost.

In April, the CMA sought feedback from interested third parties, requesting opinions on whether the deal complied with UK merger regulations and its potential impact on market competition. By July, the CMA had initiated a formal Phase 1 investigation.

Upon concluding its review, the CMA stated that before the transaction, Inflection AI held a minimal share in the UK's chatbot and AI tools market. Unlike its competitors, Inflection AI struggled to significantly grow or maintain its user base. Consequently, the CMA ruled out the need for a more detailed Phase 2 investigation, thereby endorsing the transaction.

In addition to the UK, the US Federal Trade Commission (FTC) also took interest in the deal. In June, the FTC issued subpoenas to Microsoft and Inflection AI, requiring them to submit related documents from the past two years.

While the approval facilitates Microsoft’s investments in AI, it underscores the persistence of regulatory scrutiny surrounding AI investments. Both national and international regulatory bodies remain vigilant, ensuring that such alliances do not unfairly advantage major tech companies or undermine market competition.