Artificial intelligence is a hot topic in financial markets today. With the recent rise of Nvidia, which attained a $1 trillion valuation, the hype around artificial intelligence is at its peak. Indeed, everyone wants now to be part of the AI as FOMO has reached its ultimate point. It is undeniable that artificial intelligence is becoming prominent as it is expanding in almost every aspect of human life.
Indeed, its potential and implications are driven home when you see robot soccer players improve their game to the point that they have as a team as they learn to pass, assist, and score against an opponent with the help of AI and relentless 24-hour practice. Or when machines compose better memos, white papers, and poems than you could have written—by means of generative AI that recognizes patterns in masses of training data—while defeating all the world’s chess players, often with unorthodox moves. But, as AI is gaining fulgurant momentum within financial markets, the call to regulate it is also gaining momentum.
As a matter of fact, on Tuesday, May 16, U.S. Senate held a hearing on regulating AI, with a focus on ChatGPT. Whether and how the U.S. regulates ChatGPT—and AI more generally—could help set the tone globally for AI regulation and how to address AI risks without stifling innovation. Sam Altman, CEO of OpenAI, emphasized the importance of international cooperation on issues such as AI licensing and auditing. There is already a range of international forums where cooperation on international AI governance is being discussed. It includes the US-EU Trade and Technology Council, the Global Partnership in AI (GPAI), the Organization for Economic Co-operation and Development, and the OECD.
The call for regulating AI is based on the fear of misusing sensitive data. OpenAI expressed these existential concerns since its inception. Co-founded by Altman in 2015 with backing from tech billionaire Elon Musk, the startup has evolved from a non-profit research lab with a safety-focused mission into a business. Its other popular AI products include the image-maker DALL-E. Microsoft has also invested billions of dollars into the startup and has integrated its technology into its own products. The White House has even considered authoring an AI ‘Bill of Rights.’
Those who call for AI regulations believe that regulating AI could prevent AI systems from being used to discriminate against certain groups of people, infringe on privacy rights, and cause harm to individuals and the environment. Iu Ayala Portella, CEO of Gradient Insight stated the following:
“Regulation can help to foster innovation and competition by ensuring a level playing field for all businesses. This can also help to prevent dominant companies from monopolizing the market and stifling innovation, and can promote fair competition that benefits consumers.”
One sure thing is that the hype built around AI is now raising concerns and prompting government intervention in that market. What could potentially happen if the AI market is regulated? Potential market distortions. Indeed, the AI market could potentially be distorted by arbitrary laws such as imposing price control on AI sales, increasing the barrier to entry in the AI market for potential AI companies., or even subsidizing that market. The debate on whether to regulate the AI market is still a hot topic that will be discussed for a long time.