Beyond Cloud
Why the CMA is more worried about AI software.
Happy Wednesday and welcome back to this April Fools' free newsletter.
A message from Locai Labs
SPONSORED: The UK has missed the boat on foundational AI right? Not so fast. Meet one entrepreneurial family that thinks otherwise. London startup Locai Labs has developed a UK LLM by post-training an open source model using just one node of GPUs and a tiny budget. How? Why? Find out more and get in touch with them or just chat to it at GB1.ai.
News In Brief 🩳
Pensions do VC: Three UK pension funds are investing in the British Business Bank's Growth Partnership Fund I for the first time, raising £200m. The fund is making its first investment of £8m into Wayve.
Bigger Pi: Cambridge's Raspberry Pi reported an excellent 2025 with pre-tax profits up 63 percent. The low-cost computer maker is benefiting from customers believing AI models will run on edge computing, which its products are suited to. Its shares soared 47 percent on the LSE yesterday.
How to hire: Data watchdog the ICO has updated its guidance about how to avoid AI producing unfair hiring decisions.
Tough at the top: CEOs of the largest companies (more than $5bn revenue) are under pressure to deliver returns on their AI investments, with 42 percent feeling "high" or "very high" urgency, nearly double the rate at smaller firms, research out this morning from Boston Consulting Group shows.
Happy Wednesday: Iran has threatened to target US tech companies in the Middle East from today.
The cloud decision is about more than cloud
The Competition and Markets Authority has decided against a formal cloud investigation into Amazon and Microsoft. They're going after Microsoft's software licensing instead. Why? They believe the application layer is still open and will fundamentally affect which companies dominate AI.
May Day: The watchdog will start a "strategic market status" investigation in May using its digital markets powers. It will take up to nine months and mean that new rules could be placed on how Microsoft licenses its software to businesses. Some of this is about cloud i.e. how Microsoft's software dominance affects cloud competition, but the investigation goes beyond that into the broader software layer. Many of the cloud concerns, meanwhile, are being dealt with through separate agreements with the two companies.
All part of the plan: The announcement yesterday framed the decision as focusing on AI software and giving UK firms a chance to compete on a more level playing field. The CMA argued its decision fits with the UK's AI strategy of focusing on the country's strengths at the application layer.
The time is now: "The embedding of advanced AI (including assistants and emerging agentic technologies) into familiar workplace tools means this is a pivotal moment for the sector," the CMA's decision report said. "As these tools become an increasingly key part of the workplace, there is a unique opportunity now: to ensure UK businesses and public sector organisations can choose the AI tools that deliver the greatest productivity gains for them."
The bet: The CMA's fear is that Microsoft uses its dominance of business software to get everyone onto Copilot rather than other alternatives. Its executive director of digital markets, Will Hayter, has just returned from the US and is convinced the regulator has a window to act now while the market is still maturing. Its chief executive Sarah Cardell, meanwhile, said the decision was about "getting ahead of emerging issues".
Amazon escapes: The decision to focus on Microsoft software rather than purely on cloud doesn't sit well with all, especially after two-and-a-half years of investigating cloud. Campaign group Foxglove accused it of a "bizarre" decision to not go after Amazon with a formal investigation, when it holds around 40 percent cloud market share.
They've said they'll do it: Instead it has secured changes, and promises of future action, from Microsoft and Amazon to tackle interoperability between cloud platforms and switching fees, known as egress fees. The CMA reckons this gives it the best chance of quickly securing action. There is a progress review in six months. The full list of actions is on page 10 of this doc.
A £1bn bet on 'squishy' chat
Granola is London's latest "unicorn", raising $125m in a Series C round last week. Its co-founder Sam Stephenson tells us why he thinks the note taking app, used by companies like Lovable and Mistral, is fundamental to agentic AI.
Good to talk: "There's not really a richer form of context for the AI than the conversations that are happening in a company," Sam said. "We're trying to take this squishy human conversation and turn that into useful, structured stuff and I find that just an endlessly interesting thing to think about." That bet has turned the meeting app from a two-man band into a global company, now registered in Delaware, but firmly London-based.
The hard part: Their toughest challenge is that transcription is imperfect and getting AI to infer what people really mean in their conversations is even harder. "We're not used to the idea that our conversation is going to be informing an AI," Sam said. "A lot of the job for us is teasing that apart."
Should we change how we speak in meetings then? No, said Sam, keep the small talk. "I want the meeting to be as messy and realistic as possible. It gives us real life examples to design with." He wants Granola to become more than a note-taking app and develop into a "proactive assistant", following up on the outcome of work meetings.
How to beat the big guys: Sam believes Granola is heading in a different direction to transcription apps like Otter, but general purpose LLMs do keep him up at night when he thinks about the company's competition. The key is to be an expert in a niche area, he said, and being in London over San Francisco helps with that. "San Francisco is incredibly hype driven. I think it's really easy to lose sight of actually solving your users' problems."
First steps: The Morning Intelligence is four weeks old. In that time it's broken news on the CMA's cloud inquiry, government AI regulation plans and given you intel before anyone else on copyright and the Chancellor's Mais Lecture. Alongside that, it's published in-depth looks at AI's actual impact on jobs and held tech companies to account for their investment promises. On April 13, I'm starting paid subscriptions, with 100% of revenue going into producing more independent journalism in this crucial, but under-reported area. Do join me if you can.
Thanks for reading, back tomorrow.
Tom