China fears are driving a new "AI industrial complex"
AI infrastructure is in high demand and short supply, and that's pushing tech giants and chipmakers into a shotgun alliance with governments both in the U.S. and around the world to try to boost output and free up chokepoints.
Why it matters: This new "AI industrial complex" is rushing to spend fortunes to avoid overdependence on Taiwan's dominant chip factories.
The big picture: No one has enough AI infrastructure — chiefly, the advanced microprocessors that power generative AI systems.
- CEOs hoard Nvidia chips while a slew of companies are promising to build chip factories on American soil and state-owned or -funded efforts around the world are seeking to build and commercialize AI models in a range of languages.
What's happening: Mark Zuckerberg announced last week that Meta has amassed 340,000 Nvidia H100 GPUs — the chips that have powered the development and use of ChatGPT.
- OpenAI CEO Sam Altman is raising billions to set up a network of chip factories to produce advanced semiconductors, most of which today — including Nvidia's coveted GPUs — are manufactured in Taiwan.
- Microsoft flagged chip shortages as a risk to its bottom line in its 2023 yearend report.
What they're saying: Altman told Axios' Ina Fried at the World Economic Forum that "none of the pieces are ready" for delivering AI infrastructure "at the scale that people want it."
- Zuckerberg is not taking any chances, telling The Verge his H100 buying spree "may be larger than any other individual company['s]" — and will continue, whether others "appreciate that" or not.
Between the lines: Taiwan's role as the world's pre-eminent supplier of high-end chips could be disrupted by an invasion, blockade or other military interference from China.
- China's Communist government has laid claim to Taiwan since 1949, when it was occupied by the fleeing Republican losers in China's civil war.
If that dispute turns hot, the AI supply chain would become collateral damage.
- U.S.-based AMD, Nvidia's closest competitor in the AI chip market, has been looking to reduce its dependence on the industry-leading Taiwan Semiconductor Manufacturing Co. (TSMC), which fabricates most AMD-designed products.
Taiwan's producers are hedging their bets too.
- TSMC is working on a two-plant, $40 billion project in Arizona.
- GlobalWafer, another Taiwan-based chipmaker, broke ground on a Texas plant in November, after CEO Doris Hsu warned that supply chains would break down within weeks if China invaded Taiwan.
$200 billion has been committed to new U.S. chip manufacturing infrastructure, across several dozen sites, per the Semiconductor Industry Association.
- The biggest investments come from the likes of Intel, Micron and TSMC — and the Biden Administration has also announced funding for 25 National AI Research Institutes.
Global investments are also piling up. Tiny UAE, with fewer than 10 million citizens, has launched a new state-backed artificial-intelligence company to commercialize sectoral versions of the country's high-performing Falcon model.
- The goal is to use AI to turn UAE into a global power player, the country's AI minister, Omar Sultan Al Olama, told Axios.
- UAE's $1.5 trillion sovereign wealth fund controls GlobalFoundries, one of the five biggest semiconductor fabricators, after its 2021 U.S. IPO.
- Japan's effort to reinvigorate its flagging chip sector has drawn the backing of American companies, including IBM.
National AI stockpiles are being created in India and the U.K.
- The Indian government is purchasing 24,500 GPUs for startups and academics to use at 17 dedicated centers, while the British government will invest over $600 million to provide advanced chip access to researchers, non-profits and startups.
- The Indian government will also fund 500 AI/deep tech startups at the product development stage, mirroring French President Emmanuel Macron's plan to pump $600 million into creating local "AI champions."
- Ministers in India, France and the Middle East see home-grown AI models as ways to preserve and promote their languages and culture.
- Krutrim, an Indian start-up, launched a 10-language LLM in December, with CEO Bhavish Aggarwal saying it will help make "India the most productive, efficient and empowered economy in the world."
Flashback: Despite Silicon Valley's libertarian rhetoric and free-market preferences, government and high tech industries have long been intertwined — as illustrated by the internet itself, which started as a government research project.
- The phrase "military-industrial complex" was popularized by President Dwight Eisenhower — a five-star general and "supreme commander" of allied forces in World War II — who warned in his farewell address about the excessive influence of weapons manufacturers on government policy.