LONDON — Microsoft on Tuesday was accused of unfairly overcharging customers of rival cloud companies in a lawsuit claiming damages of more than £1 billion ($1.27 billion).

The lawsuit alleges customers using Amazon Web Services (AWS), Google Cloud Platform or Alibaba Cloud — all key competitors to Microsoft’s Azure cloud — are forced to pay more to license the tech giant’s cloud-based Windows Server software on rivals’ infrastructure.

Microsoft offers a cheaper price to firms running Windows Server on Azure than on direct competitors like AWS, Google’s cloud or Alibaba Cloud. The lawsuit argues firms running the widely-used server software are essentially being overcharged to use alternative cloud computing solutions.

It adds Microsoft leverages its dominant market position in cloud-based server operating systems by extracting higher prices and inducing customers into moving to Azure. Claimant Maria Luisa Stasi, a competition lawyer, is seeking more than £1 billion in compensation for firms affected.

Microsoft was not immediately available for comment when contacted by CNBC.

“Put simply, Microsoft is punishing UK businesses and organisations for using Google, Amazon and Alibaba for cloud computing by forcing them to pay more money for Windows Server,” Stasi, who is head of law and policy for digital rights advocacy group Article19, said in a statement shared with CNBC.

“By doing so, Microsoft is trying to force customers into using its cloud computing service Azure and restricting competition in the sector.”

She added the lawsuit “aims to challenge Microsoft’s anti-competitive behavior, push them to reveal exactly how much businesses in the UK have been illegally penalized, and return the money to organizations that have been unfairly overcharged.”

Thousands of British businesses and organizations are represented in the lawsuit, which is an “opt-out” collective action. That means that any company potentially affected is automatically counted and can receive a payout if Microsoft loses.

Stasi represents the customers of Amazon, Google and Alibaba but doesn’t represent any of these firms, her spokesperson told CNBC.

The development comes as the U.K.’s Competition and Markets Authority is preparing “behavioral” remedies addressing anti-competitive practices in the cloud industry following a months-long probe, with two sources telling CNBC last month a provisional decision could come as soon as this week.

The CMA declined to comment on the specific timing of its provisional decision. However, it’s previously set a deadline of November to December 2024.

Earlier this year, Microsoft struck a 20 million euro ($21 million) settlement with cloud trade body CISPE and its members ending an EU antitrust complaint accusing the tech giant of unfair software licensing practices at its cloud division.

The deal saw Microsoft agree to charge firms the same price for running its software on smaller cloud companies’ systems as it does on its own Azure platform.

But in September, Google filed a fresh antitrust complaint against Google with the European Commission, the executive body of the EU.

The suit alleged that Microsoft’s software licensing terms effectively lock businesses into its Azure platform and make it harder to switch — and thus exerting control over the cloud market.

Solange Viegas Dos Reis, chief legal officer of French cloud computing firm OVHCloud, told CNBC some cloud hyperscalers are essentially “selling together two products that should be totally separated” — widely-used software and cloud infrastructure.

There’s also an issue of hyperscalers offering more functionality of their software when it’s running on their own cloud services than on third-party cloud services, Dos Reis said without singling out any particular vendor.

From 2017 to 2022, European cloud firms’ market share halved from 27% to 13%, lagging international rivals as the entire European cloud market grew fivefold to 10.4 billion euros ($11 billion), according to data from Synergy Research Group.

The issue of software licensing in cloud is one that’s not been assessed previously, Dos Reis told CNBC in an interview last week, adding OVH has “a lot of hope” with the CMA’s cloud competition case.

OVHCloud agreed its own settlement with Microsoft in July, which saw it drop its own EU antitrust complaint against the U.S. tech giant.

Major Asian chip stocks outside of China rose Tuesday, shrugging off a new round of U.S. semiconductor export curbs aimed at impairing Beijing’s capability to produce certain high-end chips.

Taiwan Semiconductor Manufacturing Company — the world’s largest contract chip supplier — saw shares rise 2.4%.

Several Japanese chip-related stocks also gained. Tokyo Electron rose 4.7%, Lasertec climbed 6.7%, Advantest gained 3.9% and Renesas Electron advanced 2.2%.

Japanese technology conglomerate Softbank, which owns a stake in British chip designer Arm, saw its shares rise 3.6%.

The Biden administration’s latest chip curbs will also target sales of high-bandwidth memory chips, which could affect the world’s two largest memory chip makers — South Korea’s SK Hynix and Samsung.

Shares of Samsung Electronics and SK Hynix, however, rose 0.9% and 1.8%, respectively. 

Derrick Irwin, portfolio manager at Allspring Global Investments, told CNBC’s “Street Signs Asia,” on Tuesday that the high-bandwidth memory controls would impact South Korean players to a degree.

“Although our belief is that the impact and sales of high bandwidth memory chips into China are reasonably small from these players in the scheme of things, and they’ll probably be able to shift that demand into the U.S. and other markets,” he said.

The Department of Commerce announced on Monday that it was curbing semiconductor exports to 140 new companies in its latest effort to limit China’s ability to access cutting edge chip technology that could be used for advancing its military capabilities.

Naura Technology Group, Piotech and ACM Research were among the largest Chinese companies to be included in the export controls list.

Shares of Naura Technology and ACM Research fell 3% and 1%, respectively, in China while Piotech rose 1%. China’s largest chipmaker, Semiconductor Manufacturing International Corporation, fell 1.5% in Hong Kong.

U.S. Secretary of Commerce Gina Raimondo said Monday that the new export controls were the “culmination of the Biden-Harris Administration’s targeted approach to impair the PRC’s ability to indigenize the production of advanced technologies that pose a risk to our national security.” 

In addition to the entities added, the latest U.S. restrictions include new controls on 24 types of manufacturing equipment and three types of software tools used for developing semiconductors. 

Last month, the effectiveness of U.S. chip restrictions had been thrown into question when it was reported that a chip made by TSMC had been found in a Huawei product. 

The latest export restrictions include a new “red flag guidance” to address compliance concerns, and several “critical regulatory changes” to enhance the effectiveness of existing controls.

China’s race to develop smarter-than-human artificial intelligence may put it ahead of the U.S., but such ground-breaking technology could also risk lessening the stronghold that the ruling Communist Party has over the world’s second-largest economy.

That’s the view of prominent AI scientist Max Tegmark, who told CNBC artificial general intelligence (AGI) is closer than we think and the narrative of a geopolitical battle between the U.S. and China racing to build the smartest AI is a “suicide race.”

While there is no singular definition of AGI, it is broadly taken to refer to AI that can outsmart humans.

Applications like ChatGPT — that allow users to prompt a chatbot for answers — have exploded in popularity. But many AI companies are racing to develop the next level, with AI that has human-level intelligence.

Sam Altman, the CEO of OpenAI, has said that AGI could be achieved by 2025. While there are other major names in the tech sector who also think AGI is close, many others think true AGI is still very far away.

As well as competition between technology companies, there is also the geopolitical battle taking place between the U.S. and China for dominance in realms from AI to chips. While this is often portrayed as a race to be first to the latest technology, Tegmark said this is not the right framing.

“I think of this battle, this geopolitical battle to build AGI first as a ‘hopium war’,” Tegmark told CNBC in an interview last month. ” I call it the ‘hopium war’ because it’s fueled by … delusional hope that we can control AGI.”

Tegmark is the president of the Future of Life Institute, a thinktank which penned a letter last year calling for AI labs to pause the development of advanced AI systems. The letter was signed by major tech names including Tesla CEO Elon Musk. Tegmark’s concern is that AI is advancing rapidly with very few guardrails in place, and no way to control it should it begin to outsmart humans.

“We are much closer to building AGI than figuring out how to control it. And that means that the AGI race is not an arms race, it’s a suicide race,” Tegmark said.

“[Musk] got a very strong reaction. Some of them, really hadn’t thought about that, and with less than a month from that, China came out with their first AI regulations,” Tegmark said, referencing new regulation governing generative AI.

China’s ministry of foreign affairs was not immediately available for comment on the anecdote. CNBC also contacted Tesla for a response from Musk.

“The U.S. doesn’t need to convince China to not build AGI. Even if the U.S. didn’t exist, the Chinese government would have an incentive to not build it because they want to be in control,” Tegmark said.

“[The] last thing they want is to lose that control.”

AI is a strategic priority for the Chinese government. The country’s biggest firms such as Alibaba, Huawei and Tencent have been developing their own AI models. The capabilities of those models are also advancing.

China was also among the first countries in the world to bring in regulation around various aspects of AI. The country’s internet is heavily censored and any information that appears to go against Beijing’s ideology is blocked. OpenAI’s ChatGPT is banned and it is well-noted that chatbots in China won’t answer questions related to politics and topics deemed sensitive by the Communist Party.

The country’s approach to AI is therefore an attempt to push innovation while also balancing its own interests. When it comes to AGI, China is likely to pursue a similar approach, according to analysts.

“I would not count on China to limit its own AI capabilities due to fears that such technologies would threaten Party rule. Similar predictions were made about the internet, they all proved to be false,” Kendra Schaefer, a partner at consultancy Trivium China,” told CNBC.

“China will attempt to dominate AGI while creating a techno-regulatory apparatus that limits what AGI is permitted to do domestically.”

The U.S. has pursued a policy of attempting to restrict China’s access to key technologies, mainly semiconductors like those designed by Nvidia, that are required to train more advanced AI models. China has responded by attempting to build its homegrown chip industry.

But regulation and rules around AI are currently fragmented. This year, the European Union enacted the AI Act, the first major law globally governing the technology. China has its own set of rules, while many other countries have not yet moved to create any regulation.

Tegmark’s hope of co-ordination around AI safety is echoed by others.

“When the dangers of competition are greater than the rewards, nations will ideally be motivated to come together and mutually self-regulate,” Trivium China’s Schaefer said.

“Indeed, some Chinese policymakers have advocated for getting out ahead of that potential issue and establishing an international governance body under the UN – similar to the International Atomic Energy Agency – so there is desire on Beijing’s side to establish a global governance body,” she said.