The NVIDIA AI Challenge, DOJ’s Standard Oil of 21st Century and CUDA’s Railroads

Nvidia lost a national GDP yesterday: “the biggest one-day loss in market cap, down $280 billion yesterday as its shares sank 9.5%”. What happened? The US Department of Justice (DOJ) sent a subpoena to investigate whether Nvidia violated antitrust laws by making it harder for buyers of its product to switch or shop around.

In the 19th century, railroads played a pivotal role in shaping the American economy, with intense competition and financial struggles characterizing the industry. However, this era also saw the rise of monopolies like Standard Oil, which revolutionized the oil industry through efficient production and transportation methods. The Panic of 1873 further exacerbated economic challenges, leading to significant repercussions for both businesses and consumers. In response to concerns about monopolistic practices, the Sherman Antitrust Act was introduced in 1890 to regulate anti-competitive behavior and promote fair competition. Fast forward to today where tech utilities dominate.

For Rockefeller’s Standard Oil, the real antitrust issue was not about crude oil. Standard Oil won via innovation in the oil industry, and became the category-king. What caused the problem was that it wanted to use railroads distribution pricing competitiveness, via bulk discounts, to keep its position. Those discounts provided asymmetric unfair positioning which other oil producers could not match. The government stepped in and helped, breaking the oil giant into pieces.

I made the same point when I argued that it was illegal what Google Search did with Apple; I wrote “ Google won search via innovation and has the rights to capture all the associated goodies on innovation. But Google should not and must not use contracts to keep its dominance on search. In other words, paying Apple about $20 billion to have Google as its default in its browser is not fair and balanced, not just for the competitors, but also for users.”

For NVIDIA, the challenge may not be the chips, but CUDA (Compute Unified Device Architecture) – the parallel computing platform and programming model from NVIDIA that allows developers to use GPUs for general-purpose processing –  which makes everything work. The CUDA and other auxiliary ecosystems may be the railroads to the AI business which is the crude oil business of the 21st century.

Yet, we do not expect the government to use the same medicine it used on Standard Oil on Nvidia. NVIDIA must be compelled to open its “software” just as Microsoft was compelled to open “Windows”, making it possible to breed new generation companies in the internet age.

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Nvidia lost a national GDP yesterday: “the biggest one-day loss in market cap, down $280 billion yesterday as its shares sank 9.5%”. What happened? The US Department of Justice sent a subpoena to investigate whether Nvidia violated antitrust laws by making it harder for buyers… pic.twitter.com/7TCRWkmCkP

— Ndubuisi Ekekwe (@ndekekwe) September 4, 2024

Comment 1: I am against antitrust laws cos it breeds government unnecessary interventions. I feel everyone should be innovative cos it will breed more competitiveness. All this government intervention are unnecessary and useless.

My Response: Without those laws, you may not even make this comment if using a PC. Microsoft would have blocked the installation of any service it did not invent on Windows. It would have made the browser work only on its services.

Your local telephone company would have blocked you from checking the prices of an alternative. Possibly, you may have to pay to comment, even as others are allowed to post free. Your local gas company can charge 10x because it is the only one with gas.

As they say, the world will be terrible if we get all our wishes: do not wish for a world without antitrust. If that happens, Google will have 1,000 subsidiaries and Google Search will be there to send you to them. 

Comment 2: If Google is paying for only it’s search engine to be used on Apple browsers that will be a monopoly and hence contravening the antivirus law.

But in this case any search engine can be set as the default in Apple. What Google pays for it’s for it’s search engine to be automatically set as the default which a user can change if desired.

My Response: Google can decide to start 1,000 companies and prefer those companies when you search for anything online irrespective of their quality levels. That does not mean you cannot visit those alternative companies yourself. So, from airline tickets to restaurants, etc, Google will run them. That Google has set its companies as defaults does not mean you cannot change the results to those alternatives. I am not sure you would like that outcome. Now, consider that scenario with your second paragraph. 

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