Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carroll and
Speaker 1: this is Here's Why, where we take one new story
Speaker 1: and explain it in just a few minutes with our
Speaker 1: experts here at Bloomberg. Chat shipt fast as app in
Speaker 1: the world to one hundred million users and today well
Speaker 1: over three hundred million users. Were the very beginning of
Speaker 1: a twenty year cycle where productivity will really increase.
Speaker 2: Using these technologies.
Speaker 1: It'll change everything, It'll be integrated into every business. Chat
Speaker 1: GPT has been a game changer in artificial intelligence. The
Speaker 1: sudden rush into large language models has propelled a handful
Speaker 1: of companies into markets superstars. So it is in video Day,
Speaker 1: happy in video data all who celebrate t SMC revenue
Speaker 1: climbing thirty nine percent in the first two months of
Speaker 1: the year. Korean shipmaker sk Highnecks delivering record quarterly profit.
Speaker 1: Previous revolutions in technology, like with personal computers or search engines,
Speaker 1: have created industry giants. This time around, the scale is
Speaker 1: even bigger. Here's why AI is creating the biggest monopolies
Speaker 1: in history. Our technology reporter Mark Bergen joins me now
Speaker 1: for more. Mark, who are first of all these megastars
Speaker 1: of AI and what do they do.
Speaker 2: The household name now is in Nvidia, which has gone
Speaker 2: from this sort of in the past few years a
Speaker 2: niche chips company mostly for the gaming industry into one
Speaker 2: of the world's largest, multi trillion dollar companies sort of
Speaker 2: associated with this AI boom, and they are of course
Speaker 2: the primary company designing what are called AI accelerators, basically
Speaker 2: the chips that go into these data centers that make
Speaker 2: things like CHATBT work. What we found in this really
Speaker 2: interesting is that behind those companies are actually three of
Speaker 2: their suppliers and partners that have a somewhat justice fortified
Speaker 2: market position. So in Vidia has about ninety two percent
Speaker 2: of the market for a accelerator, which is just phenomenal.
Speaker 2: There's a company called sk Heinex out of Korea that
Speaker 2: produces memory chips and some of the highest end memory
Speaker 2: chips that go into the sort of GPUs that in
Speaker 2: video makes. They have and estimates maybe eighty percent of
Speaker 2: that market. There is TSMC, which produces the chips for
Speaker 2: Nvidia and a lot of the rest of the world.
Speaker 2: They have for the AI chips maybe ninety five percent.
Speaker 2: Then there's a Dutch company called ASML that makes these
Speaker 2: very expensive lithography machines that are necessary to build these chips,
Speaker 2: and they have for those specific types of lithography machines
Speaker 2: that are making these chips one hundred percent market show
Speaker 2: no other company in the world.
Speaker 1: And is that how we can qualify them as monopolies?
Speaker 1: I mean, that's a big word in the business roils
Speaker 1: when we talk about enough it.
Speaker 2: Is, Yeah, And I think it should be very clear,
Speaker 2: and we say this in the story that there's a
Speaker 2: difference here where between the sort of definition of monopoly
Speaker 2: around the market share and the legal definition of a monopoly,
Speaker 2: which may be associate with anti competitive behavior. And so
Speaker 2: far there've been so antitrust cases opened against Nvidia, but
Speaker 2: no findings about these poor companies that they've demonstrated anti
Speaker 2: competitive behavior in getting this positions. So I think maybe
Speaker 2: they're not necessarily what we call an abusive monopoly.
Speaker 1: They're just good at what they do. I suppose it'd
Speaker 1: be another way to look at it as well.
Speaker 2: Yeah, I think that's one of several factors behind why
Speaker 2: we have these positions.
Speaker 1: They have huge market shares. You say in these areas,
Speaker 1: are there any competitors that we should be watching that
Speaker 1: could potentially disrupt that.
Speaker 2: One of the things that's happening in AI and this
Speaker 2: moment is everything is moving much faster than sort of
Speaker 2: the historical timelines for technology sectors or something like the
Speaker 2: personal computing and mobile phones and browsers. In Nvidia is
Speaker 2: certainly the most prominent and had gained the most from
Speaker 2: the AI boom. In some ways, is the most vulnerable
Speaker 2: here in part because they have this really fascinating dynamic
Speaker 2: where their biggest customers are now effectively coming to compete
Speaker 2: with them. Almost half their revenue comes from the big
Speaker 2: giants of Silicon Valley. They have Microsoft, Amazon, Google, and Meta.
Speaker 2: All of those companies, how have been exploring to various
Speaker 2: degrees alternatives to in video, whether it's through partnerships, whether
Speaker 2: it's to building their own customs chips and Google's cases,
Speaker 2: Google's had a custom chip for a long time, certainly
Speaker 2: developing that. Amazon, as we reported, has done some very
Speaker 2: aggressive in house design, right these companies don't want to
Speaker 2: be reliant on a partner like that for something they
Speaker 2: see is so mission critical opening eye, it's been some
Speaker 2: reporting has also been designing its own custom chip. To
Speaker 2: be clear, like we haven't seen this reflected at all,
Speaker 2: and in video sales or its projections. There are a
Speaker 2: number of startups that have come around that are also
Speaker 2: trying to replicate what in video's done or try to
Speaker 2: produce like a next generation of chip. Intel is probably
Speaker 2: the most interesting example right now. They just got a
Speaker 2: new CEO who has signaled that there want to get
Speaker 2: into this, and we call the foundry game basically being
Speaker 2: a factory like TSMC, Samsung has probably been the closest
Speaker 2: competitor sk Heinez has a lot of more competition there
Speaker 2: In the memory chips of Samsung, you have Micron, and
Speaker 2: at this point ASML is probably of those four the
Speaker 2: most entrenched. Unless some sort of black Swan event happens,
Speaker 2: it's very unlikely that we're going to see another company
Speaker 2: develop that machinery and those supply chain partnerships.
Speaker 1: To compete our competition. Regulators worried about these companies and
Speaker 1: the I suppose dominance they have in these spaces.
Speaker 2: I think short answer is yes and no. We've seen
Speaker 2: in Vidia's case, the Department of Justice last year had
Speaker 2: opened a potential case and as far as our reporting shows,
Speaker 2: the concerns here is that they are kind of bundling
Speaker 2: their software with some of their hardware products, where it
Speaker 2: basically makes it really difficult for say, someone to use
Speaker 2: a different type of chipset, because in video software is
Speaker 2: so prominent and so widely used across AI. If you're
Speaker 2: building a chatpot, if you're building a large language. One
Speaker 2: of the reasons that in Vidia has grown so well
Speaker 2: is because they were out in ahead of having this
Speaker 2: support software that worked really well with these chips The company,
Speaker 2: to be clear, has pushed back on that and said,
Speaker 2: you know, it doesn't bundle its software. It has a
Speaker 2: lot of faces, a lot of competition. There was some
Speaker 2: scrutiny around an acquisition they made this Israeli company that
Speaker 2: makes off were called run Ai, and I've talked to
Speaker 2: some people who have some critics who point out that
Speaker 2: this is sort of a traditional move that they've seen
Speaker 2: of other companies building these kind of walled gardens. In
Speaker 2: the US. Certainly, the Trump administration seems to be the
Speaker 2: signaled less interest instead of going after monopolies than the
Speaker 2: Biden administration. We haven't seen in that acquisition of Runai
Speaker 2: by Nvidia cleared in both the US and the EU,
Speaker 2: which has traditionally been much more aggressive about monopolies. So
Speaker 2: as far as there's certainly not, say, the antitrust concerns
Speaker 2: about Google or microsoftist paced in the past, or even
Speaker 2: going back further in the hardware the companies like IBM
Speaker 2: that faced mark.
Speaker 1: You've been reporting on the tech industry for many years.
Speaker 1: I wonder how you compare this moment and the emergence
Speaker 1: of these giants in art facial intelligence chips to previous
Speaker 1: big bang moments in tech. Is this an iPhone moment?
Speaker 1: Is this a Google moment in search engines?
Speaker 2: I say it's more of a Wintel moment, which is
Speaker 2: less familiar maybe, But the Wintel is that term for
Speaker 2: the combination of Microsoft and Intel sort of duopoly around
Speaker 2: personal computers that form in the eighties and really solified that.
Speaker 2: You know, every single desktop computer that shipped had Microsoft
Speaker 2: software with it and had an Intel chip inside. And that,
Speaker 2: to be clear, is that that's still a fairly dominant
Speaker 2: market position at this point. A lot of the market's attention,
Speaker 2: a lot of the legal and political tension has shifted
Speaker 2: sage to mobile and maybe now shifting to AI. But
Speaker 2: we're still you know, you and I are looking at
Speaker 2: PCs right now. Is they're still prominent parts of life,
Speaker 2: and most of them still ship with Microsoft and Intel.
Speaker 2: I think just because you know, the ship industry has
Speaker 2: traditionally had companies that have tended to dominate particular components
Speaker 2: or niches. That's not necessarily new. But what is new
Speaker 2: is the attention that this is receiving, I say, globally
Speaker 2: politically and certainly in the market. Right that the companies
Speaker 2: look and Vidia and its partners, the amount of money
Speaker 2: tied up with them in the market and the amount
Speaker 2: of money tied up in this thesis that they're just
Speaker 2: going to be increased increased in spending around AI and
Speaker 2: AI hardware. That is unprecedented.
Speaker 1: Okay, Mark Bergen, our technology reporter, Thank you very much.
Speaker 1: For more explanations like this from our team of three
Speaker 1: thousand journalists and analysts around the world, go to Bloomberg
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Speaker 1: I'll be back next week with more. Thanks for listening.