Regulators won’t spoil Microsoft’s AI earnings party this week

There are earnings weeks that merely indicate the fortunes of individual companies, and there are earnings weeks that everyone is eagerly watching to gauge the fortunes of entire sectors, and even economies. This will be one of the latter.

Between tomorrow and Thursday, Microsoft, Alphabet, Meta, Apple, and Amazon are all set to reveal their latest quarterly results. Apple aside, each of these Big Tech giants is expected to announce record revenues. Given the unprecedented girth of the tech megacaps, there will be implications for the U.S. economy as a whole. But this week will also be notable for what it says about AI’s growing importance.

In particular, analysts expect Microsoft—which along with Alphabet is set to report after the end of trading on Tuesday—to deliver a whopping 15.8% increase in revenue, largely owing to its rollout of lucrative, OpenAI-powered Copilots for enterprise customers, and growing thirst for its AI cloud infrastructure.

Having briefly overtaken Apple’s market cap earlier this month, Microsoft repeated the feat at the end of last week. This time, Wall Street consensus has it that Redmond will stay ahead, thanks to generative AI.

However, while there’s no arguing that CEO Satya Nadella’s early bet on OpenAI is paying off, everyone should also keep an eye on regulatory developments that could threaten Microsoft’s growth in this arena. In fact, two reared their heads just today.

First, the Biden administration has proposed requiring cloud providers like Microsoft and Amazon to collect details of foreign customers that are developing AI applications using their services and to report suspicious activity to U.S. authorities. This cloudy spin on the banking industry’s “know your customer” rules is very much aimed at Chinese companies that might pose a national security threat. It doesn’t come as a shock, given that President Joe Biden told the Commerce Department last year to come up with such rules, but, depending on how it’s implemented, it could nonetheless have an impact on future revenues.

Meanwhile, remember that episode early last year when Italy’s data protection authority temporarily blocked ChatGPT over privacy concerns? Seems it’s not over yet. The investigation that the Garante began at the time has now concluded that OpenAI’s cash cow does indeed violate privacy in some fashion, and the watchdog has given OpenAI 30 days to present its defense.

It’s not entirely clear what ChatGPT’s alleged violations of the EU’s General Data Protection Regulation are—a Garante spokesperson suggested to me today that it may have something to do with the legal basis for OpenAI’s collection of training data, and a lack of transparency for those whose data was collected—but GDPR fines can run to 4% of global annual revenue, and it could well turn out that Europe’s privacy regulators force OpenAI to make big changes, impact TBD.

None of which will spoil this week’s party, of course. More news below—and make sure to check out Michal Lev-Ram’s feature on the dirtiness of the chip industry.

David Meyer

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This story was originally featured on Fortune.com