April 18, 2024

A recent Microsoft deal with French AI startup Mistral AI faces antitrust scrutiny by European Union regulators. The tech giant announced on Monday that it would make Mistral’s AI models available on its Azure cloud platform and that it had made a €15 million investment in the company. 

However, the deal has raised concerns in Brussels that it could violate EU competition rules. 

Microsoft and Mistral Partnership

Microsoft stated that its €15 million investment would convert into equity in Mistral’s next funding round. Mistral is known for developing large language models similar to ChatGPT that can generate text, images, and other content.

The collaboration gives Microsoft access to Mistral’s AI capabilities while providing financial and technical support to the smaller French startup. 

Mistral had previously raised a $112 million seed round within weeks of its founding, highlighting the intense interest in the French company’s AI capabilities. 

The firm reached a valuation of about $2 billion after its most recent funding round in December 2023, when it raised €385 million (around $415 million) led by Andreessen Horowitz. 

Given the startup’s current valuation, Microsoft’s €15 million investment would equate to less than a 1% equity stake in Mistral’s next round. 

While it might be a relatively small portion, the tech giant’s backing nonetheless provides value through technical integration and the prestige of having Microsoft as an investor. 

Even with a minimal equity share, Microsoft benefits from Mistral’s technology and future growth potential.

This partnership aligns with Microsoft’s strategy of partnering with AI developers to compete with other tech giants in the race to offer cutting-edge AI services.

Deal Reinforces Need for EU AI Rules

The deal has caught the attention of EU regulators partly because Mistral actively lobbied against strict Artificial Intelligence regulations during negotiations over the EU’s AI Act. 

Mistral warned that limiting specific AI models could undermine European companies compared to American and Chinese competitors. 

Mistral advocated for looser regulations for general-purpose artificial intelligence models that can be adapted to various uses. The company was among the leading voices claiming strict rules on high-risk AI systems would hurt European innovation and commercialization.

In response to the partnership, the European Commission stated it would analyze the agreement as part of its ongoing monitoring of mergers in the technology sector

The Commission previously suggested Microsoft’s investment in OpenAI could warrant an EU merger review.

Additionally, EU regulators plan to scrutinize the collaboration under the upcoming Artificial Intelligence Act’s obligations around transparency and risk management for specific AI systems. 

The EU wants to ensure proper oversight of deals that expand the availability of potentially dangerous artificial intelligence applications in Europe. 

Regulators have become more vigilant about consolidating and cooperating with significant platforms like Microsoft. They aim to balance spurring Artificial Intelligence innovation against managing risks from large language models and other artificial intelligence systems. 

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