— BRUSSELSEuropean competition regulators on Friday opened a formal investigation into the foundation-model layer of the artificial intelligence industry, scrutinising whether the small number of firms that supply the underlying models for most generative-AI applications are foreclosing rivals and entrenching the dominance of a few cloud providers.

The inquiry, announced in a brief statement from the Berlaymont, will examine three principal questions: whether commercial agreements between the largest model developers and their cloud distributors restrict competition; whether bundled pricing structures effectively raise barriers to entry; and whether the conditions of access to compute resources advantage incumbents over upstart rivals.

"This is a market in which a small number of choices made today will shape the technological architecture of the next decade," the bloc's competition commissioner said in a brief on-camera statement. "We need to be sure that those choices are made in conditions of genuine competition."

Industry response was swift, and predictable. The largest American cloud providers said they would cooperate fully with the inquiry but maintained that the market is healthy, contestable and rapidly evolving. Smaller European developers, several of whom have lobbied vigorously for the investigation, welcomed the announcement.

The probe is the most significant European competition action in the AI sector to date, and follows a series of more discrete inquiries on both sides of the Atlantic. American antitrust enforcers have been examining a similar set of questions for nearly a year, and a decision on whether to bring formal action is expected before the end of the calendar year.

Investors barely flinched. The Bloomberg index of large American AI-exposed equities closed marginally lower on the day, a movement that one veteran technology analyst described, in an evening client note, as "more decimal point than data point."