Li Chen

Professor of Manufacturing Management

Li Chen is a professor of manufacturing management at Cornell University and has studied supply chains.

Chen says:

“Meta’s move is essentially an ‘Nvidia plus one’ strategy to diversify its supply chain dependence away from the AI chips leader Nvidia, very much like the so-called ‘China plus one’ strategy seen in global supply chains, where companies seek to diversify their predominant China supply dependence by adding an extra supplier outside China, so as to have some hedge against the tariff and geopolitical risks.

“From AMD’s perspective, their move can be viewed as an ‘OpenAI plus one’ strategy to diversify its demand dependence away from AI applications leader OpenAI, very much like the so-called ‘U.S. plus one’ strategy, where companies seek to diversify their predominant U.S. market dependence by expanding their presence in other markets such as E.U., for the same risk-hedging reasons.    

“While it appears to be win-win for Meta and AMD from their supply chain risk-hedging perspective, there might be a greater risk of the supply chain bullwhip effect looming ahead for the industry, due to the ongoing AI chips arms race. The current demand for AI chips may be highly inflated — as companies cannot get enough high-performing AI chips they need now, they tend to over-order to ensure they don’t fall behind in future. Once the supply of AI chips catches up, the inflated demand will vanish, and the industry will be left with a lot of excess AI chips inventory down the road. We have seen many such supply chain bullwhip cases before.”