Tech’s teetering towers

{"text":[[{"start":4.88,"text":"Anthropic launches its investor roadshow this week with a humble brag. The AI leader wants a $1.5tn valuation for its initial public offering despite recent stock market ructions, warns it might wipe out humanity and yet pitches itself as “a research lab”."}],[{"start":20.4,"text":"IPO filings used to be plainer. When Microsoft went public in 1986, it said accurately that it “designs . . . microcomputer software”. Eleven years later Amazon floated as “the leading online retailer of books”."}],[{"start":34.32,"text":"But now all these companies are in the same AI race. And whether they admit it or not, they are pursuing vertical integration — from reactors to robots. They tout benefits of efficiency, speed and cost control, while dodging supply bottlenecks. Scale means cheaper capital, better access to electricity and chips."}],[{"start":52.92,"text":"Alphabet has become addicted to the phrase “full stack” to explain its ubiquity. Google’s owner makes the chips, builds data centres to put them in and has the models, the applications and the machines — from billions of Android phones to Waymo cars — that exploit them."}],[{"start":68.16,"text":"Elon Musk’s SpaceX used the word “vertically” 59 times in its IPO filing in May, claiming: “We have formed the most ambitious, vertically integrated innovation engine on (and off) Earth.”"}],[{"start":79.72,"text":"SpaceX operates large data centres, is building a chip manufacturing plant, owns a frontier model in Grok. Now Musk wants to merge SpaceX with his car company Tesla, adding robots — whether humanoid or vehicles — and generating more efficiency in the vast build-out of technology."}],[{"start":null,"text":"

"}],[{"start":95.6,"text":"Amazon claims to be disinterested in which model triumphs as it will supply the compute to everyone. “All that said,” acknowledged chief executive Andy Jassy recently, “we are pursuing our own frontier model.”"}],[{"start":106.28,"text":"Nvidia, which supplies chips to the other players in the AI revolution, is also moving up the chain. In September, it agreed to acquire Hugging Face, whose platform allows developers to collaborate on open-weight AI models, and it has held talks to buy US open-model maker Reflection, a direct rival to its largest customers."}],[{"start":125,"text":"How does all this vertical empire building hold up when the political and financial winds change? Republicans were just walloped at the midterm ballot box by Democrats promising to halt data centre construction. The cost of debt to fund riskier projects has risen sharply and the share prices of some big AI players have tumbled from their highs."}],[{"start":145.86,"text":"So far the most exposed are the least vertical AI companies: the frontier labs, such as Anthropic and OpenAI, and the “neoclouds”, such as CoreWeave and Nscale, which rent compute to customers such as Microsoft."}],[{"start":159.12,"text":"Both niches have to accept terms from more powerful integrated players. Anthropic has agreed to pay SpaceX billions of dollars for compute. CoreWeave relies on Nvidia for its chips. To improve their position they want to “verticalise”, as CoreWeave puts it in its own IPO filing. Although it markets itself as “a research lab”, Anthropic also says it wants to own more data centres. No surprise that even in a volatile market, it wants to press ahead with an IPO that could raise up to $100bn."}],[{"start":189.28,"text":"While Anthropic’s model leads at the moment, there is a significant risk that it will lose out to truly vertical competitors in the same way that Netscape ceded its lead as an internet browser to Microsoft."}],[{"start":200.26,"text":"There are plenty of risks with the vertical structure, too, however. The giants are an attractive target for politicians and regulators. Even Donald Trump’s justice department is reported to have scrutinised Nvidia’s acquisitions. A leftwing shift in the US could lead to a real effort to break up Big Tech."}],[{"start":217.4,"text":"It may not need any outside force. The history of Silicon Valley shows that vertical structures are often dominant at the dawn of new technologies — but later lose out. As Clayton Christensen points out in The Innovator’s Solution: “The companies that are most successful in the beginning are those with optimised, interdependent architectures. Later, architectures and industry structures will evolve toward openness and disintegration.”"}],[{"start":241.44,"text":"IBM’s vertically integrated model dominated the era of mainframe computers. When it entered the PC market, it built an open machine around Intel chips and Microsoft software. More agile copycats soon took control of the market."}],[{"start":252.32,"text":"The question is now how this trend hits AI. For decades the largest tech companies have ducked direct competition, enjoying profitable lanes. Now they are going head to head in history’s most capital-intensive race. It doesn’t really stack up."}],[{"start":271.6,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794274701_4850.mp3"}