1 00:00:02,560 --> 00:00:10,280 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carroll and 2 00:00:10,320 --> 00:00:12,760 Speaker 1: this is Here's Why, where we take one new story 3 00:00:12,800 --> 00:00:14,840 Speaker 1: and explain it in just a few minutes with our 4 00:00:14,880 --> 00:00:22,520 Speaker 1: experts here at Bloomberg. Chat shipt fast as app in 5 00:00:22,560 --> 00:00:24,880 Speaker 1: the world to one hundred million users and today well 6 00:00:24,920 --> 00:00:28,080 Speaker 1: over three hundred million users. Were the very beginning of 7 00:00:28,080 --> 00:00:31,160 Speaker 1: a twenty year cycle where productivity will really increase. 8 00:00:31,240 --> 00:00:32,280 Speaker 2: Using these technologies. 9 00:00:32,320 --> 00:00:36,280 Speaker 1: It'll change everything, It'll be integrated into every business. Chat 10 00:00:36,320 --> 00:00:39,839 Speaker 1: GPT has been a game changer in artificial intelligence. The 11 00:00:39,880 --> 00:00:43,720 Speaker 1: sudden rush into large language models has propelled a handful 12 00:00:43,760 --> 00:00:48,040 Speaker 1: of companies into markets superstars. So it is in video Day, 13 00:00:48,280 --> 00:00:51,320 Speaker 1: happy in video data all who celebrate t SMC revenue 14 00:00:51,320 --> 00:00:53,800 Speaker 1: climbing thirty nine percent in the first two months of 15 00:00:53,800 --> 00:00:57,920 Speaker 1: the year. Korean shipmaker sk Highnecks delivering record quarterly profit. 16 00:00:58,920 --> 00:01:03,000 Speaker 1: Previous revolutions in technology, like with personal computers or search engines, 17 00:01:03,040 --> 00:01:07,360 Speaker 1: have created industry giants. This time around, the scale is 18 00:01:07,400 --> 00:01:11,840 Speaker 1: even bigger. Here's why AI is creating the biggest monopolies 19 00:01:12,160 --> 00:01:18,640 Speaker 1: in history. Our technology reporter Mark Bergen joins me now 20 00:01:18,840 --> 00:01:22,440 Speaker 1: for more. Mark, who are first of all these megastars 21 00:01:22,480 --> 00:01:23,840 Speaker 1: of AI and what do they do. 22 00:01:24,319 --> 00:01:26,760 Speaker 2: The household name now is in Nvidia, which has gone 23 00:01:26,840 --> 00:01:29,240 Speaker 2: from this sort of in the past few years a 24 00:01:29,360 --> 00:01:32,880 Speaker 2: niche chips company mostly for the gaming industry into one 25 00:01:32,880 --> 00:01:35,800 Speaker 2: of the world's largest, multi trillion dollar companies sort of 26 00:01:35,840 --> 00:01:38,040 Speaker 2: associated with this AI boom, and they are of course 27 00:01:38,120 --> 00:01:42,560 Speaker 2: the primary company designing what are called AI accelerators, basically 28 00:01:42,640 --> 00:01:44,800 Speaker 2: the chips that go into these data centers that make 29 00:01:45,240 --> 00:01:48,960 Speaker 2: things like CHATBT work. What we found in this really 30 00:01:49,000 --> 00:01:52,320 Speaker 2: interesting is that behind those companies are actually three of 31 00:01:52,360 --> 00:01:56,880 Speaker 2: their suppliers and partners that have a somewhat justice fortified 32 00:01:56,920 --> 00:02:00,360 Speaker 2: market position. So in Vidia has about ninety two percent 33 00:02:00,440 --> 00:02:03,320 Speaker 2: of the market for a accelerator, which is just phenomenal. 34 00:02:03,800 --> 00:02:06,680 Speaker 2: There's a company called sk Heinex out of Korea that 35 00:02:07,000 --> 00:02:09,200 Speaker 2: produces memory chips and some of the highest end memory 36 00:02:09,280 --> 00:02:11,799 Speaker 2: chips that go into the sort of GPUs that in 37 00:02:11,919 --> 00:02:15,400 Speaker 2: video makes. They have and estimates maybe eighty percent of 38 00:02:15,440 --> 00:02:19,040 Speaker 2: that market. There is TSMC, which produces the chips for 39 00:02:19,320 --> 00:02:21,480 Speaker 2: Nvidia and a lot of the rest of the world. 40 00:02:21,600 --> 00:02:24,440 Speaker 2: They have for the AI chips maybe ninety five percent. 41 00:02:24,440 --> 00:02:27,360 Speaker 2: Then there's a Dutch company called ASML that makes these 42 00:02:27,639 --> 00:02:32,080 Speaker 2: very expensive lithography machines that are necessary to build these chips, 43 00:02:32,160 --> 00:02:35,600 Speaker 2: and they have for those specific types of lithography machines 44 00:02:35,720 --> 00:02:38,480 Speaker 2: that are making these chips one hundred percent market show 45 00:02:38,520 --> 00:02:40,160 Speaker 2: no other company in the world. 46 00:02:40,400 --> 00:02:42,680 Speaker 1: And is that how we can qualify them as monopolies? 47 00:02:42,680 --> 00:02:44,280 Speaker 1: I mean, that's a big word in the business roils 48 00:02:44,280 --> 00:02:45,359 Speaker 1: when we talk about enough it. 49 00:02:45,320 --> 00:02:46,639 Speaker 2: Is, Yeah, And I think it should be very clear, 50 00:02:46,680 --> 00:02:48,120 Speaker 2: and we say this in the story that there's a 51 00:02:48,120 --> 00:02:50,880 Speaker 2: difference here where between the sort of definition of monopoly 52 00:02:50,960 --> 00:02:55,000 Speaker 2: around the market share and the legal definition of a monopoly, 53 00:02:55,360 --> 00:02:58,840 Speaker 2: which may be associate with anti competitive behavior. And so 54 00:02:58,919 --> 00:03:03,800 Speaker 2: far there've been so antitrust cases opened against Nvidia, but 55 00:03:03,919 --> 00:03:07,760 Speaker 2: no findings about these poor companies that they've demonstrated anti 56 00:03:07,800 --> 00:03:11,400 Speaker 2: competitive behavior in getting this positions. So I think maybe 57 00:03:11,480 --> 00:03:13,959 Speaker 2: they're not necessarily what we call an abusive monopoly. 58 00:03:14,240 --> 00:03:16,079 Speaker 1: They're just good at what they do. I suppose it'd 59 00:03:16,080 --> 00:03:17,520 Speaker 1: be another way to look at it as well. 60 00:03:17,639 --> 00:03:21,080 Speaker 2: Yeah, I think that's one of several factors behind why 61 00:03:21,280 --> 00:03:22,480 Speaker 2: we have these positions. 62 00:03:22,760 --> 00:03:25,360 Speaker 1: They have huge market shares. You say in these areas, 63 00:03:25,400 --> 00:03:27,920 Speaker 1: are there any competitors that we should be watching that 64 00:03:28,000 --> 00:03:29,519 Speaker 1: could potentially disrupt that. 65 00:03:29,960 --> 00:03:32,760 Speaker 2: One of the things that's happening in AI and this 66 00:03:32,840 --> 00:03:35,720 Speaker 2: moment is everything is moving much faster than sort of 67 00:03:35,760 --> 00:03:41,040 Speaker 2: the historical timelines for technology sectors or something like the 68 00:03:41,360 --> 00:03:45,680 Speaker 2: personal computing and mobile phones and browsers. In Nvidia is 69 00:03:45,840 --> 00:03:48,280 Speaker 2: certainly the most prominent and had gained the most from 70 00:03:48,280 --> 00:03:51,160 Speaker 2: the AI boom. In some ways, is the most vulnerable 71 00:03:51,200 --> 00:03:54,600 Speaker 2: here in part because they have this really fascinating dynamic 72 00:03:54,640 --> 00:03:58,720 Speaker 2: where their biggest customers are now effectively coming to compete 73 00:03:58,720 --> 00:04:02,160 Speaker 2: with them. Almost half their revenue comes from the big 74 00:04:02,280 --> 00:04:06,320 Speaker 2: giants of Silicon Valley. They have Microsoft, Amazon, Google, and Meta. 75 00:04:06,360 --> 00:04:09,840 Speaker 2: All of those companies, how have been exploring to various 76 00:04:09,840 --> 00:04:14,160 Speaker 2: degrees alternatives to in video, whether it's through partnerships, whether 77 00:04:14,160 --> 00:04:17,200 Speaker 2: it's to building their own customs chips and Google's cases, 78 00:04:17,360 --> 00:04:20,279 Speaker 2: Google's had a custom chip for a long time, certainly 79 00:04:20,320 --> 00:04:23,200 Speaker 2: developing that. Amazon, as we reported, has done some very 80 00:04:23,200 --> 00:04:26,159 Speaker 2: aggressive in house design, right these companies don't want to 81 00:04:26,160 --> 00:04:29,520 Speaker 2: be reliant on a partner like that for something they 82 00:04:29,600 --> 00:04:32,039 Speaker 2: see is so mission critical opening eye, it's been some 83 00:04:32,120 --> 00:04:35,159 Speaker 2: reporting has also been designing its own custom chip. To 84 00:04:35,160 --> 00:04:36,919 Speaker 2: be clear, like we haven't seen this reflected at all, 85 00:04:36,960 --> 00:04:40,000 Speaker 2: and in video sales or its projections. There are a 86 00:04:40,120 --> 00:04:43,400 Speaker 2: number of startups that have come around that are also 87 00:04:43,440 --> 00:04:45,960 Speaker 2: trying to replicate what in video's done or try to 88 00:04:45,960 --> 00:04:49,599 Speaker 2: produce like a next generation of chip. Intel is probably 89 00:04:49,640 --> 00:04:51,680 Speaker 2: the most interesting example right now. They just got a 90 00:04:51,720 --> 00:04:55,920 Speaker 2: new CEO who has signaled that there want to get 91 00:04:55,920 --> 00:04:58,000 Speaker 2: into this, and we call the foundry game basically being 92 00:04:58,000 --> 00:05:01,600 Speaker 2: a factory like TSMC, Samsung has probably been the closest 93 00:05:01,600 --> 00:05:06,080 Speaker 2: competitor sk Heinez has a lot of more competition there 94 00:05:06,080 --> 00:05:09,400 Speaker 2: In the memory chips of Samsung, you have Micron, and 95 00:05:09,640 --> 00:05:13,480 Speaker 2: at this point ASML is probably of those four the 96 00:05:13,480 --> 00:05:16,960 Speaker 2: most entrenched. Unless some sort of black Swan event happens, 97 00:05:16,960 --> 00:05:18,960 Speaker 2: it's very unlikely that we're going to see another company 98 00:05:19,480 --> 00:05:23,839 Speaker 2: develop that machinery and those supply chain partnerships. 99 00:05:23,200 --> 00:05:29,400 Speaker 1: To compete our competition. Regulators worried about these companies and 100 00:05:29,520 --> 00:05:32,599 Speaker 1: the I suppose dominance they have in these spaces. 101 00:05:33,000 --> 00:05:35,360 Speaker 2: I think short answer is yes and no. We've seen 102 00:05:35,600 --> 00:05:38,400 Speaker 2: in Vidia's case, the Department of Justice last year had 103 00:05:38,440 --> 00:05:41,400 Speaker 2: opened a potential case and as far as our reporting shows, 104 00:05:41,440 --> 00:05:44,000 Speaker 2: the concerns here is that they are kind of bundling 105 00:05:44,040 --> 00:05:46,520 Speaker 2: their software with some of their hardware products, where it 106 00:05:46,600 --> 00:05:51,280 Speaker 2: basically makes it really difficult for say, someone to use 107 00:05:51,960 --> 00:05:55,080 Speaker 2: a different type of chipset, because in video software is 108 00:05:55,120 --> 00:05:57,920 Speaker 2: so prominent and so widely used across AI. If you're 109 00:05:57,920 --> 00:06:00,960 Speaker 2: building a chatpot, if you're building a large language. One 110 00:06:00,960 --> 00:06:03,039 Speaker 2: of the reasons that in Vidia has grown so well 111 00:06:03,120 --> 00:06:05,520 Speaker 2: is because they were out in ahead of having this 112 00:06:05,600 --> 00:06:10,159 Speaker 2: support software that worked really well with these chips The company, 113 00:06:10,160 --> 00:06:12,239 Speaker 2: to be clear, has pushed back on that and said, 114 00:06:12,480 --> 00:06:14,600 Speaker 2: you know, it doesn't bundle its software. It has a 115 00:06:14,600 --> 00:06:16,719 Speaker 2: lot of faces, a lot of competition. There was some 116 00:06:16,760 --> 00:06:19,800 Speaker 2: scrutiny around an acquisition they made this Israeli company that 117 00:06:19,839 --> 00:06:22,919 Speaker 2: makes off were called run Ai, and I've talked to 118 00:06:22,960 --> 00:06:25,200 Speaker 2: some people who have some critics who point out that 119 00:06:25,240 --> 00:06:27,000 Speaker 2: this is sort of a traditional move that they've seen 120 00:06:27,040 --> 00:06:29,919 Speaker 2: of other companies building these kind of walled gardens. In 121 00:06:29,920 --> 00:06:32,760 Speaker 2: the US. Certainly, the Trump administration seems to be the 122 00:06:32,920 --> 00:06:37,479 Speaker 2: signaled less interest instead of going after monopolies than the 123 00:06:37,480 --> 00:06:41,920 Speaker 2: Biden administration. We haven't seen in that acquisition of Runai 124 00:06:42,040 --> 00:06:44,960 Speaker 2: by Nvidia cleared in both the US and the EU, 125 00:06:45,040 --> 00:06:49,159 Speaker 2: which has traditionally been much more aggressive about monopolies. So 126 00:06:49,720 --> 00:06:54,120 Speaker 2: as far as there's certainly not, say, the antitrust concerns 127 00:06:54,480 --> 00:06:58,440 Speaker 2: about Google or microsoftist paced in the past, or even 128 00:06:58,560 --> 00:07:01,279 Speaker 2: going back further in the hardware the companies like IBM 129 00:07:01,360 --> 00:07:02,520 Speaker 2: that faced mark. 130 00:07:02,560 --> 00:07:04,720 Speaker 1: You've been reporting on the tech industry for many years. 131 00:07:04,800 --> 00:07:08,080 Speaker 1: I wonder how you compare this moment and the emergence 132 00:07:08,080 --> 00:07:13,240 Speaker 1: of these giants in art facial intelligence chips to previous 133 00:07:13,560 --> 00:07:16,920 Speaker 1: big bang moments in tech. Is this an iPhone moment? 134 00:07:17,080 --> 00:07:19,640 Speaker 1: Is this a Google moment in search engines? 135 00:07:19,920 --> 00:07:21,840 Speaker 2: I say it's more of a Wintel moment, which is 136 00:07:21,920 --> 00:07:24,640 Speaker 2: less familiar maybe, But the Wintel is that term for 137 00:07:25,080 --> 00:07:29,480 Speaker 2: the combination of Microsoft and Intel sort of duopoly around 138 00:07:29,560 --> 00:07:33,800 Speaker 2: personal computers that form in the eighties and really solified that. 139 00:07:34,000 --> 00:07:37,440 Speaker 2: You know, every single desktop computer that shipped had Microsoft 140 00:07:37,760 --> 00:07:41,000 Speaker 2: software with it and had an Intel chip inside. And that, 141 00:07:41,320 --> 00:07:45,200 Speaker 2: to be clear, is that that's still a fairly dominant 142 00:07:45,400 --> 00:07:48,960 Speaker 2: market position at this point. A lot of the market's attention, 143 00:07:49,600 --> 00:07:52,080 Speaker 2: a lot of the legal and political tension has shifted 144 00:07:52,200 --> 00:07:55,080 Speaker 2: sage to mobile and maybe now shifting to AI. But 145 00:07:55,120 --> 00:07:56,840 Speaker 2: we're still you know, you and I are looking at 146 00:07:57,000 --> 00:08:00,960 Speaker 2: PCs right now. Is they're still prominent parts of life, 147 00:08:01,000 --> 00:08:04,800 Speaker 2: and most of them still ship with Microsoft and Intel. 148 00:08:04,880 --> 00:08:07,680 Speaker 2: I think just because you know, the ship industry has 149 00:08:07,720 --> 00:08:12,760 Speaker 2: traditionally had companies that have tended to dominate particular components 150 00:08:12,840 --> 00:08:16,560 Speaker 2: or niches. That's not necessarily new. But what is new 151 00:08:16,680 --> 00:08:20,480 Speaker 2: is the attention that this is receiving, I say, globally 152 00:08:20,680 --> 00:08:23,560 Speaker 2: politically and certainly in the market. Right that the companies 153 00:08:23,600 --> 00:08:28,000 Speaker 2: look and Vidia and its partners, the amount of money 154 00:08:28,040 --> 00:08:30,480 Speaker 2: tied up with them in the market and the amount 155 00:08:30,480 --> 00:08:33,040 Speaker 2: of money tied up in this thesis that they're just 156 00:08:33,120 --> 00:08:37,040 Speaker 2: going to be increased increased in spending around AI and 157 00:08:37,320 --> 00:08:39,719 Speaker 2: AI hardware. That is unprecedented. 158 00:08:40,040 --> 00:08:42,880 Speaker 1: Okay, Mark Bergen, our technology reporter, Thank you very much. 159 00:08:43,240 --> 00:08:45,720 Speaker 1: For more explanations like this from our team of three 160 00:08:45,720 --> 00:08:48,520 Speaker 1: thousand journalists and analysts around the world, go to Bloomberg 161 00:08:48,559 --> 00:08:53,679 Speaker 1: dot com slash explainers. I'm Stephen Carroll. This is here's why. 162 00:08:53,760 --> 00:08:56,040 Speaker 1: I'll be back next week with more. Thanks for listening.