The FTC’s inquiry into Microsoft, Amazon, and Alphabet’s AI alliances is the opening shot in a showdown that could reshape tech

Antitrust regulators may have been late to the game in regulating social media giants. But on Thursday they made it clear they don’t intend to make that same mistake with AI.

So far, the reaction has been a big shrug.

The FTC’s surprise announcement that it was examining the multi-billion dollar partnerships between Microsoft, Amazon, and Alphabet and generative AI startups OpenAI and Anthropic, was a direct shot at what many consider the future of the tech giants’ businesses. And yet shares of Microsoft, Amazon, and Alphabet all finished Thursday’s regular trading session in positive territory.

Wall Street’s muted reaction marked a curious start to what could become the biggest Silicon Valley versus DC showdown since the effort to break up Bill Gates’ Microsoft nearly three decades ago. But with society and business still coming to grips with generative AI’s power and its fast adoption, the usual script may not apply. As the FTC moves forward with its inquiry, the power of the government to control AI, while balancing it with the demands of the marketplace, will be put to the test.

“Concentrated economic power has become a huge threat to democracy and human autonomy,” tweeted longtime Silicon Valley investor Roger McNamee on Thursday after the FTC announcement. “Big Tech is using AI to extend its power, despite insane misuse of water & energy, theft of IP, low ROI use cases,” he said.

The inquiry announced by the FTC is a somewhat unusual approach for the agency, which tends to combat anticompetitive behavior via probes and lawsuits against M&A deals. In the case of Anthropic and OpenAI, these companies are independent—even if they do boast multibillion dollar investments and have cloud giants with outsized standing on their cap tables. Microsoft has invested at least $13 billion into OpenAI, and owns a 49% stake in the company. In October, Google agreed to invest $2 billion in Anthropic, and Amazon agreed to invest up to $4 billion in the company the month prior.

But it’s likely not just the size of these investments that has the FTC looking into these companies in particular, but the concentration. Even though AI companies have ignited interest from investors across the startup ecosystem, close to half of the capital being poured into generative AI—approximately 44% of it—is coming from six companies alone, according to PitchBook. The FTC is probing five of them, and the sixth is GitHub, which is owned by Microsoft. Most startups aren’t going to be able to raise the kind of capital needed to build out and operate these large language models. (The cost to train GPT-4 alone, for example, was more than $100 million).

“It's natural that the FTC is engaging,” Pete Flint, general partner at the seed-stage venture capital firm NFX, tells Fortune in an email, noting that these kinds of investments may include potential conflicts or bundling opportunities around commercial contracts that would give tech company investors an edge.

As Fortune has reported, these kinds of deals have come with much more than just equity. In the case of Microsoft, OpenAI depends on Microsoft for its cloud computing data centers. OpenAI uses them to train and run its models.

While it might make sense for the FTC to put its nose into these kinds of partnerships, it’s unclear whether the FTC will have any kind of success in doing so, as Microsoft, Amazon, and Google don’t control any of these companies themselves—and could bring all of their generative AI efforts in-house. Alphabet already has a long history of doing just that, having set up Google Brain in 2011, and then buying DeepMind a few years later.

Microsoft CEO Satya Nadella took on the issue at the World Economic Forum in Davos this year, saying that Microsoft’s approach is less competitive than if they were to build out generative AI capabilities solely on their own. “If we want competition in AI against players who are vertically integrated, I think partnerships is one avenue of, in fact, having competition,” he said. In a statement to Fortune for this story, Microsoft’s corporate vice president Rima Alaily said that “the U.S. has assumed a global AI leadership position because important American companies are working together. Partnerships between independent companies like Microsoft and OpenAI, as well as among many others, are promoting competition and accelerating innovation.”

But regulatory interest in OpenAI, in particular, appears to be heightened after the temporary ouster of its CEO, Sam Altman, by the board last fall, when Microsoft swept in with an offer to bring on the OpenAI team as a subsidiary of Microsoft. After the debacle subsided and Altman returned to OpenAI as CEO, Microsoft took a board observer seat at the non-profit, which was pointed out in the Competition and Markets Authority’s preliminary investigation announcement it made shortly after. It’s unclear whether Altman’s termination had anything to do with the FTC’s inquiry. An FTC spokeswoman declined to comment on the matter.

OpenAI, Anthropic, and Amazon declined to comment for this story. A Google spokesperson said that the company hopes “the FTC’s study will shine a bright light on companies that don’t offer the openness of Google Cloud or have a long history of locking-in customers—and who are bringing that same approach to AI services.”

This story was originally featured on Fortune.com