AI is an increasingly critical general-purpose technology with disruptive potential across a wide range of markets. The infrastructure supply chain that supports AI, including data centres and the compute resources they house, are attracting unprecedented levels of investment.
The AI infrastructure supply chain is characterised by both rapid innovation and several structural features with potential competition issues. On one hand, firms across the chain from semiconductor design to cloud-based compute services, are investing heavily in research, development, and deployment, driving technological progress at a fast pace. At the same time, the supply chain exhibits high barriers to entry at many levels due to the capital intensity, technical complexity and economies of scale involved. Several layers of the chain are highly concentrated, and there is a growing trend toward vertical and conglomerate integration, as firms seek to control multiple stages of the value chain. Strategic partnerships and exclusive arrangements are also becoming more common, potentially reinforcing existing positions and shaping access to critical inputs.
In addition to these structural features, the strategic significance of AI to national competitiveness and security has led to increasing levels of government intervention across the supply chain. Public investment, regulatory initiatives, and industrial policy measures are shaping market dynamics in areas such as chip fabrication, data centre development and access to compute. While such interventions may aim to support innovation and resilience, they also have the potential to influence competitive conditions, particularly where they intersect with existing market concentration or reinforce strong market positions.
To date, competition authorities have primarily focused their market studies on the cloud services and AI modelling layers of the value chain. However, there is scope for deeper analysis of upstream segments which would enhance understanding of how infrastructure influences competitive dynamics. Given the global nature of these markets, competition authorities should consider whether it is possible to co‑ordinate such efforts. While enforcement activity in this area remains limited, several initial investigations have been launched. Authorities also face strategic choices in how to assess the growing number of partnerships, joint ventures and long-term agreements emerging across the supply chain, including whether these arrangements warrant scrutiny under merger control frameworks or as potential anti‑competitive agreements.
Looking ahead, competition authorities may need to consider the full extent of their policy and enforcement powers as they engage with this rapidly evolving market. In the early stages, tools such as advocacy, deterrence and merger control may play a particularly important role in shaping market behaviour and guiding industry development. However, policymakers will also need to assess whether existing powers are sufficient to address potential abuses of dominance, particularly where exclusionary effects may arise. This could include evaluating the need for ex ante measures, such as interoperability requirements, to complement traditional enforcement. Moreover, while concerns around exclusion and market power may attract significant attention, authorities should remain vigilant in other areas. The scale of infrastructure construction underway suggests that risks such as bid rigging may become more salient, and as technologies mature and commoditise, the potential for price co‑ordination or cartel behaviour may also increase.