[2510.23421] Quantifying Systemic Vulnerability in the Foundation Model Industry

Economics > General Economics arXiv:2510.23421 (econ) [Submitted on 27 Oct 2025 (v1), last revised 24 Mar 2026 (this version, v2)] Title:Quantifying Systemic Vulnerability in the Foundation Model Industry Authors:Claudio Pirrone, Stefano Fricano, Gioacchino Fazio View a PDF of the paper titled Quantifying Systemic Vulnerability in the Foundation Model Industry, by Claudio Pirrone and 2 other authors View PDF HTML (experimental) 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...