With the consolidation of so much of the internet’s infrastructure, the hardware that powers what we see on our screens is now run by so few companies that if one service provider goes down many others are affected.
This month it was Amazon Web Services (AWS) and its Virginia cluster, and software you’ve never heard of called DynamoDB. Last year it was computers running Microsoft’s Windows that was brought down by software you’d probably also never heard of, appropriately called CrowdStrike.
This is the fragile status of the vital communication infrastructure that powers how we work and communicate. Talk about the butterfly effect writ large. There are so many moving parts to get that TikTok video to load on your phone. First there’s the phone and its operating system, which is one of only two: Apple’s iOS and Google’s Android. Then there’s your wireless broadband connection to the internet itself. In SA there are four service providers for this.
From there, there are many huge infrastructure providers who have data senders, undersea cables, data senders on the other side of the sea and more. Those multiple “underseas” are supposed to offer redundancy in case one is damaged. But as we saw in March 2024 what happens when four cables into Africa are broken at the same time? On the day it happened, March 14, it caused a two-hour outage that took down cellular data and local hosting services.
Then there are the big cloud service providers — including AWS, Azure, Google, Oracle, Huawei, Vodafone and many more — that do the actual hosting. These vast networks have been shown to be susceptible to software flaws.
The CrowdStrike outage affected 8.5-million devices, Microsoft said, which rendered the services of major hospitals, banks, airlines and airports inoperable. It also floored many government departments.
All of this brings new meaning to the phrase about someone sneezing and the world catching a Covid infection. Fortunately, in SA we no longer have to deal with load-shedding, which was a huge impediment to decent connectivity for most of us who use mobile broadband as our primary connection.
Africa is often described as a mobile-only continent since the vast majority of Africans connect to the internet only through mobile phones and someone else’s fast Wi-Fi if we’re lucky.
Internet access is the backbone of the world as we know it, right? The Suez Canal can be clogged for six days by the giant tanker ship Ever Given (which may well go down as the greatest guerrilla marketing ploy of all time) but one African in a digger unblocked that canal.
Yet one server farm in Virginia caught a cold and the world got a snotklap. This is the world we live in ― get used to it.
Silicon Valley
Meanwhile, Nvidia broke the $5-trillion threshold this week. That alone is remarkable, but the even more impressive thing is it added R1-trillion in just four months. In July Nvidia made headlines for reaching the $4-trillion mark. It took 30 years for Nvidia to reach $1-trillion, two years to $4-trillion and four months to $5-trillion. Anyone else see a bubble?
With this story, the New York Times technology section featured these headlines about the Silicon Valley giants increasing their stranglehold on their respective industries: “Microsoft increases investments amid AI race” or $34.9bn last quarter, “Meta raises its spending forecast on AI to above $70bn” and “Alphabet revenue jumps 16% with strong cloud sales” and profits of $35bn.
Talk about consolidation. There are not many companies that can spend this kind of money. The winners and losers in this race have already been decided.
When you see how much Nvidia influences the US economy it gets scarier. “Investment in information processing equipment and software is 4% of GDP,” says Harvard economic policy professor Jason Furman of the recent splurge on building data centres for AI. “But it was responsible for 92% of GDP growth in the first half of this year.”
Here’s the stinger: “GDP excluding these categories grew at a 0.1% annual rate.” In plain English, without the gold rush of spending on AI the US economy would have grown at a rate even slower than SA’s.
That’s right, the world’s largest economy is pinning its hopes on this one big bet. No-oneon Wall Street seems to remember the pragmatic advice of bobbas (grandmothers) everywhere ― don’t put all your eggs in one basket.
If it looks like a bubble, as analysts and market-watchers have been warning, it’s a bubble. Meanwhile, “OpenAI has now signed about $1-trillion in deals this year for computing power, partnering with Nvidia, Oracle, and others,” says legendary technology reporter Kara Swisher on her Pivot podcast.
Earlier this month AMD announced that OpenAI would buy its processors and had the option to buy 10% of the chipmaker. AMD’s share surged 40% or more than $80bn. “OpenAI’s cash burn is probably an estimated $115bn [to] 2029 and the latest valuation puts it at $500bn, making it the world’s most valuable private company,” Swisher said.
But, as her Pivot co-host Scott Galloway replied, all of these Big Tech firms are investing in each other’s big bets (AI, chips, data centres) and fuelling a huge, self-sustaining hype cycle.
“When you have 10 companies responsible for 40% of the S&P’s value and the S&P makes up 50% of the total world’s value, you have 10 companies responsible for 20% of the entire valuation of public equities globally, meaning that is the string that if it gets pulled, you know, everything, everything goes down. What pulls it then?”
The internet broke this month because of excessive consolidation. Now it’s coming for the global economy. Get used to it.
• Shapshak is editor-in-chief of Stuff.co.za.
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