The vertical integration allows them to corner the market and destroy the competition or prevent them from entering the market, which is bad for the consumer and bad for society, eventually.

It's lack of anti-trust laws and (more importantly) enforcement that allow companies to corner the market. nVidia and ARM should be worried about competition from OpenAI and Google: that's the good kind of competition that we want. If only "hardware companies" are legally allowed to make hardware, that increases their moat, not decreases it.

Let's instead go back to when we actually enforced the anti-trust laws that we have. That was nice.

Would OpenAI be competing with them, though? If they just manufacture their own and use their own, but don't sell them, then nVidia and ARM are just losing a client, not getting competition.

Ideally what we would see is OpenAI investing in a new but independently operated chip manufacturer that makes chips to their standards. Though is it also possible that a chip of such standard would be so specialized that it wouldn't be usable by others? I'm not a hardware person, so that's a genuine question.

> If they just manufacture their own and use their own, but don't sell them, then nVidia and ARM are just losing a client, not getting competition.

That's competition. Apple Silicon completes with Intel at an ecosystem level.

I'm very hesitant to define competition as "can't sell to them because they make theirs in house". Losing a sale isn't competition. Competition is someone threatening to take your clientele from you with their own offering. Apple can afford to design and use its own chips, but they're in a pretty unique position to do so. It's not like every other consumer of their chips is going to say "hey, if it's that easy, I'll do it too".

Ironically, Open AI are going to face the same gigantic barrier to enter the market.

As of today, I say if they go into consumer market they will fail.

If they go into specialised server chips, then they would have a chance, with some sort of accelerator over some arm-based chip - similar to what Nvidia is doing with Grace. Still big money to be spent on supporting the existing ecosystem on their hardware.

I would go even further. I was wondering why most chip companies are so good at being mediocre. Like TI OMAP dropping out of smartphones and so on. But I think it's worthwhile to invert the question. It is quite extraordinary in the silicon space for there to be 1 clear winner like Nvidia or Qualcomm (or Intel not so long ago). So much so, that we can assume they got there by anti-competitive means and rent-seeking measures.

> I was wondering why most chip companies are so good at being mediocre.

Because anything to do with hardware, particularly anything with silicon, has immense startup costs.

If we're making bets on OpenAI vs Nvidia in the hardware space, I know who I'm picking.

That's a broad claim, you have to prove your case. You're asking for a ban on vertical integration as a business strategy.

Vertical integration is already under scrutiny by the antitrust folks. Even more so now after everything Google was able to get away with.

OpenAI wanting to vertically merge to make their own AI chips may seem harmless enough (it's a good business move, we can cut expenses)! But we can't forget that Sam Altman just a few months ago told Congress he supports making an organization that companies need permission from to being creating/utilizing advanced AI systems. And he's such a kind man he's willing to lead that organization himself.

Obviously someone integrating the chips to train AI, and having the ability to approve/deny his own competition is a huge red flag.

Well kind of. You are ignoring the elephant in the GPU hardware room right now, which is NVidia.

NVidia has a near monopoly on the AI hardware market right now, so some vertical integration of alternative AI hardware doesn't seem nearly as big if a deal if it is needed to fight that current monopoly.

That's true, but again, him attempting to put himself as the gatekeeper of who can and cannot train/utilize advanced AI systems at scale gives him (almost) unilateral control over Nvidia's own AI chip manufacturing business. Deny startups the ability to train AI systems, and you deny Nvidia the opportunity to sell them their chips. Nvidia loses that revenue stream and stops producing AI chips due to high production costs and "lack" of demand. Ultimately leading to a market where only the obscenely wealthy companies who can manufacturer their own in-house chips can train AI, and even then, Sam Altman can deny even that.

It’s inevitable(?) that the trend to vertical integration will continue, slowly pushing more and more non-vertical companies into irrelevance.