It is entirely true that certain forms of economic power do need to be regulated. It’s also true that there are those who would insist that anything, everything, must be regulated. This is one of those second:

But regulators do too, because they know from experience how monopolies engage in illegal anti-competitive behavior that squashes competitors and manipulates the market to expand their dominance. The US Department of Justice (as well as other competition authorities and tech observers) suspects Nvidia has used such tactics to entrench its chips monopoly, and last month it was reported that the Department of Justice was opening an antitrust investigation. It’s high time.

No one has the slightest idea how this is all going to work out. Let alone the regulators - so what are they going to do in their regulation then? Other than piddle about, waste everyones’ time and collect fat cheques for doing so?

And there’s another reason to be wary of a hyper-concentrated chip market: AI regulation, be it the EU’s AI Act or the White House executive order on AI, is emerging slowly, putting Nvidia – which gets to decide who gets chips for what – in a quasi-regulatory role. That’s not the way things should work; regulatory policy is a public function, and a for-profit company should not be allowed, through its sheer size, to fill the vacuum. But Nvidia likes it this way, and has stepped up lobbying to try to maintain its de facto control of global AI.

Tsk, cannot have that at all. Industry participants taking the place of bureaucrats? Heavens to Betsy isn’t that a violation of all that is Good and Holy?

It is possible to give a little pencil sketch of how this is going to work out. The whole point of GPUs is that they do graphics - that’s what the G is, graphics - better than general purpose CPUs. The hint is in the name. However, the how they do it is by being better at floating point operations. OK. Which means that we can look at another area of the chip industry for a guide.

Crypto mining depencds upon those floating point operations as well. Which is why mining crypto quickly moved off general purpose CPUs and into graphics chips. That was the first boom that Nvidia enjoyed in fact. But that boom ended. Because specialisation is good. So therefore people designed chips that specialised in the specific processes that mined crypto, not chips that were just good at floating point. What are known as ASICs. Which now have the crypto market and Nvidia pretty much doesn’t get a look in these days.

As sure as eggs is eggs this will happen again. Because specialisation is good. The why should be obvious enough - currently Nvidia gets to charge truly massive prices for what is essentially processed sand. Every capitalist - and VC more importantly - worth their greed is thus throwing money at those who think they might have an idea about ASICs for AI. Design some of those, send the designs to TSMC and the job’s a good ‘un.

The cure, you see, for high prices being high prices.

The most important part here being that this is going to happen faster than any bureaucracy can swing into action. Or even, faster than any bureaucracy can expensively swing into action.

It is entirely true that certain monopolies need to be regulated. Sure it is. It’s even true that certain technical monopolies do. But one that is under attack from the world’s largest concentration of bright people - Silicon Valley - and faces the world’s largest concentration of risk loving capital - Silicon Valley - through a specialisation cycle well understood by Silicon Valley probably isn’t one of those technical monopolies that requires regulation.

Well, not unless you belong to the regulatory school of if it moves regulate it.

Tim Worstall