Eye On AI: More Regulators Look Into AI Investing

This column is a look back at the week that was in AI. Read the previous one here.

It’s been nearly a year since Microsoft announced its $10 billion megadeal with OpenAI — the biggest startup funding round of 2023 in any sector.

However, it seems like many regulators are just now starting to notice.

In what has been a slow beginning to the new year on the AI and funding news front, the biggest news of the week was that European Union antitrust regulators are now looking into whether such a deal is subject to its merger rules.

This comes after U.K. regulators last month said they were exploring whether the partnership violated antitrust laws in that country and after reports broke that the Federal Trade Commission in the U.S. was looking at similar issues.

It seems like the Sam Altman will-he-stay-will-he-go drama back in November caught many regulators’ eyes as governance questions arose and the company’s atypical nonprofit status came under the spotlight.

While no official probe has been launched in the U.S., it seems like the EU is treading a little heavier, announcing it will look at competition in the  generative AI market and “into some of the agreements that have been concluded between large digital market players and generative AI developers and providers.”

In that announcement, it explicitly said it will examine whether Microsoft’s investment in OpenAI might be reviewable under its merger regulation — however, it makes clear it will look at other Big Tech companies looking to get ahead in the AI space.

Microsoft, which has a nonvoting position on OpenAI’s board, has maintained it does not own a portion of the startup, but the recent moves and reports about three different regulatory bodies now looking at its investment and partnership with OpenAI must have caught the attention of others.

Will scrutiny force Big Tech to reconsider AI deals?

Chip giant Nvidia and search powerhouse Google have made numerous investments in AI startups in the past year. While none of those deals were the size and magnitude of Microsoft’s, the recent moves by regulators could force some large strategics to rethink any bigger investment deals they may be planning, as well as any M&A ambitions they may have — knowing governments are looking at deals in the space more closely than ever.

The regulatory news also once again cast a spotlight on the Altman debacle from late November. That little melodrama not only had an impact on OpenAI, but caused officials around the world to take note as it sparked market concerns and now reverberates through the whole sector.

AI produced a lot of headlines in 2023, and the start of this year seems to foreshadow more of the same in 2024.

Things that caught our eye and other stuff:

Funding announcements have been slow so far this new year in AI. However, there were a couple in the last week related to health that caught our attention.

• First, Paris-based startup Nabla locked up a $24 million Series B led by Cathay Innovation. The startup has created an AI copilot for doctors that takes notes for them and streamlines writing medical reports. The health care world is full of inefficiencies, costing not just time but also quality care. Freeing up some more time for doctors is beneficial to everyone.
• Outcomes of drug trials can be hard to predict — which is why they need to be done. QuantHealth is looking to help with that. The Israel-based startup uses AI to predict trial outcomes — which can lower potential costs of drug discovery. QuantHealth raised fresh cash this week from Accenture Ventures. While no financial details of that raise were released, the company said its Series A totaled $17 million after announcing $15 million of it last year.

Illustration: Dom Guzman