Follow the Money:The Chips powering AI

**Sam Fenwick** (0:03)
The familiar sound of a computer booting up. You're probably near one right now. A phone in your hand, a laptop open in front of you. Switch it on, and somewhere inside, a small piece of silicon starts doing sums, billions of them, every second. You've never seen it, but it's the reason the thing in front of you works.
And this is that sound scaled up. A room full of machines, rows of them running hot, kept alive by fans that never stop. I'm standing in one right now at the BBC, and it's quite cool in here. This is the noise behind the AI boom, behind every answer from ChatGPT, every image, every model that runs on chips, tens of thousands of them.
I'm Sam Fenwick, and this is Business Daily from the BBC World Service. The chip industry is one of the fastest growing on earth. This year, it's heading for a trillion dollars in sales. So today, we're following the money from the company that designs the chip to the factory that builds it to the one machine that makes it possible and the island the whole thing depends on. This is the chip inside the AI boom. Who's getting rich off it and who's paying the bill?
AI seems to be everywhere at the moment, from designing new medicines to forecasting the weather and driving autonomous cars. What it seems capable of is mind-blowing. You might think of it as software, something that lives on a screen, a chat bot, an app, an answer that appears out of nowhere. But every one of those applications runs on a chip, a piece of silicon that you can hold in your hand, and the chip doing all the hard work started life running video games. Follow that chip and you follow the money behind AI. So let's start at the top of the chain with the company whose name you've probably heard of already.
Nvidia, the most valuable company on earth right now. But here's the strange part. Nvidia doesn't own a single factory that makes its chips. It designs them for someone else to build. Karl Freund is the founder of Cambrian AI Research, an independent firm whose clients, like many in the sector, include Nvidia. He spent years inside the industry at companies like AMD. So what does Nvidia actually do?

**Karl Freund** (2:37)
Nvidia designs chips. They design CPUs, they design networking chips, and of course, they're most famous for designing graphics processing units, GPUs, which used to be used for gaming applications, and now are primarily used for artificial intelligence.
Nvidia doesn't want to be a manufacturer of chips. That's a completely different business than designing chips. It's very capital intensive.

**Sam Fenwick** (3:01)
So Nvidia is the architect. It draws the chip. People call Nvidia the toll booth for AI, the idea being that you have to go through them to get there.

**Karl Freund** (3:13)
They definitely have control of the main road. Why? Because you can probably get your AI model up and running faster using Nvidia than anything else. The software is widely available.
Most software is built, run specifically on Nvidia and then ported to other chips.

**Sam Fenwick** (3:31)
There are other lanes now. So Google is building its own chips. So is Amazon and Microsoft. But Nvidia still owns the main road. And here's why nobody will be able to catch them up.

**Karl Freund** (3:44)
Nvidia shows the world how to do something that has probably never been done before in a production environment. And everybody says, oh, that's a good idea. I'm going to do the same thing. And they do it. It may take 18 months to two years to actually put that into silicon and then bring it to market. Well, meanwhile, Nvidia engineers have been inventing the next thing you ought to think about adding to your chip. So they're always a generation ahead.

**Sam Fenwick** (4:09)
So every year there's a new, more advanced chip. And rivals like AMD and Google, well, they're running to catch a train that has already left the station. According to analysts at Morgan Stanley, around 85 cents in every dollar spent on AI chips goes to Nvidia. 85 cents to a company that doesn't own a single factory. So that's the design, the blueprint. But the blueprint isn't a chip. To turn Nvidia's idea into something real, we have to travel to Taiwan.
So while the chip design runs through one company, so does manufacturing.
It's called TSMC, and no other company can make the most advanced chips at the scale the world needs. It sits on an island in the Taiwan Strait. One analyst who's been inside knows the strange truth about the most important factory in the modern economy. It doesn't look like much.