The AI Supply Chain

Leonardo Gambacorta and Vatsala Shreeti

No 20143, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The rapid advancement of artificial intelligence (AI) relies on a complex supply chain comprising five key layers: hardware, cloud infrastructure, training data, foundation models and AI applications. This paper examines the market structure of each layer and highlights the economic forces shaping them: rapid technological change, high fixed costs, economies of scale, network effects and, in some cases, strategic behaviour by dominant firms. We also highlight the expanding influence of big tech companies across the AI supply chain. We discuss the challenges for consumer choice, innovation, operational resilience, cyber security and financial stability.

Keywords: Market structure; Competition; Artificial intelligence; Financial stability; Cyber risk; Big tech; Generative AI (search for similar items in EconPapers)
JEL-codes: E31 J24 O33 O40 (search for similar items in EconPapers)
Date: 2025-04
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