Author: Ben Thompson Publication: Stratechery Date: February 25, 2025 URL: https://stratechery.com/2025/ai-promise-and-chip-precariousness/
"AI Promise and Chip Precariousness" is a February 25, 2025 Stratechery essay by Ben Thompson. It argues that the AI industry occupies what Thompson calls a "goldilocks" position commercially while the chip strategy underpinning it is fragile, and it advances the thesis that cutting China off from TSMC chips may reduce China's incentive to preserve Taiwan. Thompson presents the essay as a companion to Anthropic and Alignment.
Summary of argument
Thompson frames AI as being in a "goldilocks" position: leading labs retain sufficient incentive to invest in new foundation models, even as competition from DeepSeek and Llama drives API prices down and pushes labs toward differentiated products. He identifies three sustainable paths to margin: a cost advantage in infrastructure (Google's TPUs); a sustainable model-capability advantage (Claude on coding); and aggregator status (ChatGPT). In his account, DeepSeek and Llama are commoditizing the supply side, while Grok 3 serves as a "step-order" reminder of compute scale, illustrating that the fastest way to compete is to buy the best chips.
The chip landscape
Thompson surveys the hardware picture. He describes Nvidia and TSMC as the still-dominant axis, and argues that DeepSeek has increased Chinese H20 demand because Chinese firms adopting DeepSeek's models still want fast inference chips. He characterizes AMD as software-bottlenecked, a continuation of a "great chips limited by poor software" pattern.
On the Chinese side, Thompson points to Huawei's Ascend chips, fabricated on SMIC's 7nm DUV process with quad-patterning. He argues that chip speed is not the binding constraint for inference; memory bandwidth is, and that bandwidth is improvable at the current node. Combined with China's ability to build more data centers and more power, he treats Ascend as a viable inference contender.
He notes that hyperscaler custom silicon — AWS Trainium, Microsoft Maia, Google TPUs, and Meta MTIA — is all fabricated by TSMC. On Intel, he describes a multi-stage failure to become a foundry; he views the 18A process as promising but constrained by a small customer base and a limited cash position.
The Taiwan / TSMC flashpoint thesis
Thompson's central geopolitical argument is that cutting China off from TSMC chips reduces China's incentive to preserve TSMC. In his framing, the deterrent value of TSMC's existence is itself a function of China's dependence on it.
He links this logic to Anthropic and Alignment: if AI becomes nuclear-weapon-class in geopolitical leverage, and chip controls cut China off from AI, Thompson argues it becomes game-theoretically rational for China to destroy TSMC, ensuring no one has AI rather than allowing the United States to monopolize it. This conclusion runs against Dario Amodei's "selling chips to China is crazy" position.
Systemic-view tradeoffs
Thompson sketches two scenarios for the second Trump administration. The first is a pivot to Asia: gearing up to defend Taiwan and seeking to break the China-Russia relationship. The second is a "Monroe 2.0" retrenchment: accepting China as Asian hegemon and retrenching to the Americas. He argues that both scenarios make Taiwan the flashpoint, differing only in whether the United States fights for it or concedes it.
Provenance and related work
The essay is referenced explicitly in Anthropic and Alignment and serves as its conceptual companion. Thompson's argument also overlaps thematically with Hendrycks/Schmidt/Wang's Superintelligence Strategy and Buchanan/Collins's AI Grand Bargain, though his strategic conclusions diverge from theirs.
Relationships
- depends-on: Ben Thompson
- related: Nvidia & TSMC — AI Compute Infrastructure
- related: ASML — EUV Lithography Monopoly
- related: Intel
- related: DeepSeek
- related: xAI
- related: Aggregation Theory
- related: Open-Source AI / Open-Weight Models
- related: AI and National Security
- related: BIS Framework for AI Diffusion — Interim Final Rule (RESCINDED)
- supports: Anthropic and Alignment — Ben Thompson (Stratechery, March 2026) — referenced explicitly
- contradicts: Dario Amodei's "selling chips to China is crazy" position