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