No wind against the ride of Microsoft, Google, Nvidia & Open AI

The growth of the technogic biggies does not stop, although many authorities around the world are trying to limit their monopoly. The latest is the imminent US antitrust intervention that wants to examine the artificial intelligence sector 'as a matter of urgency', following fears that power over this transformative technology is being concentrated among a few very wealthy individuals. Also in Europe, in order to limit the advance of artificial intelligence and to ensure that already dominant technology companies do not control the market, after two intensive years of work last March, Parliament passed the Artificial Intelligence (AI) Act, which guarantees security and respect for fundamental rights and promotes innovation. Thanks to the European Parliament, unacceptable AI practices will be banned in Europe.

One wonders whether this situation will have an impact on revenue and profit trends as well as on stock market trends, since the bigtech giants seem unbeatable with fabulous performances and revenues beyond expectations. According to experts, the path ahead is still smooth and unhindered for the coming months at least. All this although the US regulator, the FTC (Federal Trade Commission) and the Department of Justice are ready to investigate the relationship between Microsoft and OpenAI and the activities of Nvidia. The FTC is also investigating the practices of Microsoft and Google to acquire the most promising researchers in AI from Inflection and Anthropic, which invested in these companies but did not inform the antitrust authorities. 'If antitrust authorities were to impose restrictions on market transactions (mergers or strategic acquisitions) this could lead to a reduction in the market power and ability to expand of these companies,' explains Filippo Diodovich, senior strategist at IG Italy, 'the financial penalties can be significant and affect revenues and profits. In addition, we foresee an increase in costs to sustain potentially lengthy and expensive legal battles and to expand the compliance department. Not to mention the loss of investor confidence'. According to the expert, a significant short correction movement is possible should regulators decide to financially sanction Big Tech by suspending some of the recent AI deals.

At the moment, the market does not seem to be worried about such investigations and the companies involved (Nvidia, Microsoft, Alphabet) maintain strong bullish trends. Karen Kharmandarian, investment manager at Thematics AM, an affiliate of Natixis IM, shares the same opinion. "Global restrictions do not have a significant impact on big tech in the short term," she specifies. "Export restrictions in some countries are a hindrance for those companies whose revenue growth and profitability depend significantly on those countries. However, for many of them, especially those that have a technological advantage and/or are protected by high entry barriers, currently positioned at the right part of the value chain, their products and services enjoy greater demand than supply. They therefore have many more market opportunities ahead of them to maintain their momentum. In addition (reshoring/ nearshoring), nations' quest for greater sovereignty in leading-edge technologies offer new opportunities for growth. As she points out, intensified regulatory oversight highlights two other aspects: 1) it promotes more competition for the benefit of customers; 2) it raises entry barriers and business costs for new entrants, thus helping incumbents to benefit from higher growth for longer. "Furthermore, a clear regulatory framework," adds Kharmandarian, "creates the necessary conditions for the development and commercialisation of technology products and services without running the risk of future regulatory backlash.

Rolando Grandi, LFDE manager, also points out that regulators will increasingly keep a close eye on Big Tech, but this will not hinder their long-term growth prospects. 'This group of companies developed mainly through the technology revolution (internet + smartphones) and now the Artificial Intelligence revolution has arrived just in time to reinvest in that technology and drive further growth,' he explains. 'Over the next few years, this group is expected to invest more than USD 1 trillion in AI infrastructure and will predictably earn significant returns on investment. This is an unprecedented amount, which demonstrates the importance of the AI revolution and the potential for revenue.More challenging is the impact that new regulation may have on smaller and smaller companies, which will face increasing regulatory burdens. Ultimately, we think the technology-related stock market rally should expand."