Many promising startups in Silicon Valley's generative AI sector are being acquired or closely tied to major tech companies like Microsoft and Amazon, often due to financial struggles.

While aligning with large tech companies provides startups with necessary funding to maintain momentum, it raises concerns about stifling competition and innovation in the industry.

Regulators in the U.S., EU, and UK are closely examining the ties between startups like Inflection and Adept with Microsoft and Amazon, signaling potential regulatory responses to protect the AI industry.

This increased scrutiny is evident in recent cases, such as the cancellation of the sale of Israeli cybersecurity company Wiz to Google due to antitrust concerns.

Critics argue that these arrangements resemble acquisitions designed to evade competition regulators, a claim that Microsoft and Amazon deny.

Startups founded by former leaders at major tech companies are attempting to recreate the funding conditions of highly successful research labs.

Companies like Character AI are struggling to secure funding to remain independent, while others, such as the French startup Mistral, are at risk of buyouts.

Notable startups, including Inflection AI and Adept, have seen key executives depart for larger tech firms due to funding shortages.

For instance, Mustafa Suleyman, the former head of Inflection, has joined Microsoft, taking key employees with him and leaving Inflection stripped of its core assets.

OpenAI, the creator of ChatGPT, has a significant partnership with Microsoft, which has invested $13 billion for exclusive access to OpenAI's advanced models.

The development of generative AI requires substantial financial investment and resources, typically only available from large tech giants.

On July 22, 2024, regulators from the U.S., EU, and UK issued a joint statement emphasizing their commitment to overseeing the AI industry to prevent big tech from dominating the market.