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Quantifying Systemic Vulnerability in the Foundation Model Industry

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  • Claudio Pirrone
  • Stefano Fricano
  • Gioacchino Fazio

Abstract

The foundation model industry exhibits unprecedented concentration in critical inputs: semiconductors, energy infrastructure, elite talent, capital, and training data. Despite extensive sectoral analyses, no comprehensive framework exists for assessing overall industrial vulnerability. We develop the Artificial Intelligence Industrial Vulnerability Index (AIIVI) grounded in O-Ring production theory, recognizing that foundation model production requires simultaneous availability of non-substitutable inputs. Given extreme data opacity and rapid technological evolution, we implement a validated human-in-the-loop methodology using large language models to systematically extract indicators from dispersed grey literature, with complete human verification of all outputs. Applied to six state-of-the-art foundation model developers, AIIVI equals 0.82, indicating extreme vulnerability driven by compute infrastructure (0.85) and energy systems (0.90). While industrial policy currently emphasizes semiconductor capacity, energy infrastructure represents the emerging binding constraint. This methodology proves applicable to other fast-evolving, opaque industries where traditional data sources are inadequate.

Suggested Citation

  • Claudio Pirrone & Stefano Fricano & Gioacchino Fazio, 2025. "Quantifying Systemic Vulnerability in the Foundation Model Industry," Papers 2510.23421, arXiv.org, revised Mar 2026.
    • Handle: RePEc:arx:papers:2510.23421
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    References listed on IDEAS

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    1. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
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