An interesting implication of this is that AI inference and training has a path to a ~3x hardware cost reduction (and maybe ~2x total cost reduction) without any technical innovation whatsoever, we just need to wait for dram supply to meet demand (either by manufacturing scaling or just waiting for the current rate of manufacturing to fill the demand spike).
Makes prior assumptions that getting tens of gigs of ram is cheap thrown out the window. Would likely lead to super fast SSDs such as optain being way more valuable
It is one of the thing with consumer when they remember they brought it at the absolutely lowest price point when DRAM maker were bleeding money.
Those are not normal pricing. Before the pricing collapse in early 2020, 96GB DDR5 would have cost about $450 to $500. And I will need to restate again the cost of DRAM hasn't really changed much in the past 20 years. Its price just goes up and down in cycles.
So in reality it is more like going from $500 to $1300. But consumer felt it was more like going from $200 to $1300.
Crucial are already selling DRAM made by CXMT. And China are already throwing money at it. I doubt the memory bubble will burst in next 12-24 months. As in going back to money losing DRAM pricing. As they will all pivot to HBM or other money making products. But the bulk of lower end consumer DDR5 or LPDDR5 will goes to Chinese Foundry. Assuming they have figure out how to do them well. Which they have improved but are still so far away from industry leaders.
Normally memory maker will push the next DDR standard to market just to push out Chinese competitors, I am not sure it will work the same this time around. DDR5 have plenty of other usage / demands.
Everything I read seems to suggest that RAM capacity is going to grow at 20-25% a year, which just doesn't seem good enough. Even in consumer use cases, phones and laptops would benefit greatly by double the amount of RAM. And then obviously, the AI need is gigantic.
I don't see it going away. I mean, it may not grow as fast as now, but I don't see it growing away either. I get why the memory makers do not want to bankrupt themselves, but it feels like there's got to be some way to push that risk off onto model providers and other people in the ecosystem to allow us to grow ram capacity more like 50% per year.
According to the recent article HBM memory is 3x less efficient wafer area wise than LPDDR; but the bandwidth is more than triple.
What if its in everyone's interest to buy computers at say 1/3rd the rate and switch everything over to HBM?
the discrepancy between compute and memory has been growing for ages, perhaps a painful switch to HBM is exactly what we need?
Would you rather have 3 intermediate computers with low memory bandwidth, or wait a little longer statistically so that we can all enjoy a new computer at 1/3rd the rate but much higher bandwidth than the area ratio?
I mean the biggest risk is Chinese CXML benefits and capturing markets that others are leaving hanging and then being able to compete and push out the others when costs start to normalize.
As for 20-25% growth not being enough, I think it's not that far off, if we assume data center build out plans hit a wall and slow down significantly, and the AI heat starts to cool off.
I don't think 20-25% may be enough in the short term but if the AI build out stops within this year, we have a massive oversupply instead of a under supply.
Is there any indication research is being focused on reducing menory footprint of inference for frontier class models? Is the low hanging fruit already gone there?
I really don’t want to give anyone ideas, but doesn’t this make the Nvidia 5090 an unbelievably good deal right now?
The VRAM in the 5090 is only made by one country in the world.
The 50xx series is special, because its ram is so dependent on a single commodity. It’s not like a 4090 or a 3090; their VRAM chips have been around for years.
If there’s a shortage or interruption in DDR7 VRAM, it seems like every GPU that requires it would explode in value.
I hope I don’t regret posting this because I’d really like to buy one myself…
With only 32gb of vram, you can only run small/quantized models, in which case what's the point? At $4000, that gets you 20 months of 10x claude or chagpt subscriptions, which provide far better models. You'd need some use case where you can tolerate worse models, and use a steady supply of them. That doesn't match most people's usage patterns.
Which surely is the highest it'll ever be! You're suggesting that the price will go down in the future? Would love to hear more about your thought process!
Are you saying we're entering a period where tech increases in price instead of decreases? I guess it depends upon time horizon, but your statement isn't very specific.
There was only a very brief time it was selling for MSRP (last fall for $2000). Even if you use that as the previous data point, it's only 200% increased.
Bought a second hand Dell server a week ago. The entire rig with a 12-core CPU and 32GB DDR4 ecc RAM cost as much as I'd pay to buy 64 GB of DDR RAM alone. I hope there's an end to this absurdity soon enough otherwise the pain will affect other markets too. I read the other day that PC case sales have collapsed by more than 40%.
I feel like by the time the AI bubble bursts the PC market will be irreparably damaged. Manufactures who have been making "enterprise" parts aren't going to go back to making consumer parts because there will be no market for it. And with a glut of datacenters not making any money on slop, they are going to be repurposed for saas, stuff like OnShape but for every application.
Most users don't seem to care about storing everything they generate in cloud services and this could easily be sold as an alternative to owning "expensive" desktop or laptop hardware.
It's the reason I just build a new PC, despite the insane prices, I'd rather overpay than have reasonable prices but no stock to buy. With any luck I'll get 8-10 years out of this one and by then the PC landscape will be something else entirely.
This is 100% going to kill the home built pc market. When I started building gaming pcs, the top top card was 750$ (NZD). Now they’re 10,000 just for the gpu and another 1-2000 for ram.
People used to get into gaming pcs as an affordable hobby, now it’s making general aviation look like plan B.
It's more likely to kill the AI market. They're overbuilding capacity and most of it is going unused. The upcoming haircut is going to kill a lot of the major players.
They've intentionally crafted an unsustainable business model in an effort to get users in the front door and raise their MAUs. We've seen this story before. We should know precisely where it's headed.
Indeed, Gamers Nexus is doing interviews with PC component manufacturers, and some are hurting bad right now. The PC market is no longer in competition, but rather survival mode. =3
I'm not moving past my DDR4 build (and the 32 GB of DDR4 2133 MHz backup chips I still have around from way back, before I got the current 3200 MHz ones) until the prices go back to being at least partially sane. This also means that CPU manufacturers are not getting my money (since the 5800X is fine for now) and I have no reason to get a new GPU either (though admittedly the B580 isn't perfect).
It's still unclear to me: the shortage is semiconductor boules / wafers? or the shortage is semiconductor fab process step availability?
As long as the discussion seems focused on memory, I'd suspect the latter, but if its really the semiconductor boules/wafers, then I'd expect the boule growers to profit, not the memory makers, who just pass on the cost.
And that article is contradicting other voices. If that article were correctly identifying the bottleneck as wafer shortage due to switching to HBM, why is everybody discussing the memory makers instead of the boule growers. Memory makers can expand operations all they can, which makes no sense if wafer supply doesn't follow, and the article is suspicously light on semiconductor boule / wafer mfr's.
So which is the bottleneck: fabs or boule growing?
It’s fab capacity. Fwiw dram is different enough that fabs are not transferable between dram memory and other usages. It’s nice to think ‘wow if they made the current 10nm dram on the latest 2nm processes it’d be much faster’ but it doesn’t work that way. The specific size is needed for the capacitance. Sram can be made on fabs that make other circuitry since it’s transistor not capacitor based but is less dense.
I wonder why the hyperscalers aren't vertically integrating more and building their own fabs. Sure, a fab costs a billion dollars, but they're currently spending hundreds of billions of dollars purchasing chips from NVidia and others.
I'm not sure if they should vertically integrate, it would probably be a better idea to directly fund the expansion of capacity, much like Apple does when they scale up a new technology for iPhones.
However, that the hyperscalers and AI companies aren't doing this says a lot about their true beliefs about how much future demand AI will have.
AI companies claim they will need a ton of massive expansion, but are unwilling to take on the risk of the capital needed for that expansion.
I'm hearing a lot of sad whining from AI folks about how these chip makers are holding them back, but who actually has the money to finance the expansion easily? Chip makers have been through this game far longer, when Sam Altman went around claiming it was time for $7T of fabs the AI companies made it clear that they were willing to make ridiculous claims, eliminating credibility.
What's needed now is for them to funnel a tiny amount of their massive piles of cash into financing fabs directly.
A fab takes years to build even when you have the necessary know-how. If you don't it'll take some additional experimenting before you can compete with the established manufacturers. By the time you can produce a usable chip the shortage might be over.
Do we though? DLSS 5 changes that somewhat from a “we need powah” to “we need models”. I think the future consumer GPU market will be tuned for image and world inference while workstation cards will be tuned for image and video inference. The old way of thinking about this will come to an end when we stop looking at the render loop as the be-all-end-all…
If DLSS 5 becomes the norm it's possible that just makes things worse. The DLSS 5 demos required an entire separate card to run the model, though IIRC NVIDIA did claim it would eventually work on a single card. Given what the model is doing (yassifying the whole scene instead of just upscaling/reconstructing) it makes sense to me that it would increase compute demand instead of reduce it like previous versions of DLSS.
You're probably thinking about jevons paradox. But you slightly mis-stated. It is the phenomenon that increasing the efficiency of resource consumption can end up increasing total consumption.
As you stated it, it would merely be a property of (nearly) all demand curves. Jevons paradox only happens sometimes. It isn't a law.
An example of where it stopped happening is with gasoline in developed countries. Cars having better fuel efficiency doesn’t make me drive further to the grocery store or work.
Generally when someone replaces their vehicle the new one is more fuel efficient than the old one even if I bought the same car.
Nine years after Google's seminal paper lit the fuse on AI, a total lack of manufacturing foresight has trapped over a trillion dollars of incoming capital in a hardware bottleneck.
The entire sector is now facing a critical RAM starvation crisis where memory manufacturers are actively slow-rolling supply just to keep prices high and avoid running out entirely.
This has created an unprecedented supply-and-demand distortion where desperate companies are getting rejected even at a 5x markup, and mission-critical SKUs are skyrocketing to 10x and 20x their baseline value.
It is a macroeconomic squeeze at a staggering scale, and the massive venture scale opportunity lies in capturing the value created by this memory gatekeeper.
From the perspective of an armchair economist, the winners will be the investors who invest in RAM wisely. The losers will likely be cash strapped SAAS companies. They’re almost completely dependent on a fleet of servers in the hyperscalers, and they’re leasing those servers and services. That leaves small SAAS companies exposed to incoming inflation in the cost of hosting.
Capex expenditure start exploding after covid with the chart going hockey stick at the end of 23/start of 24, almost 2.5 years ago.
A lot of capex is supposed to go into the datacentres, didn't they know that datacentres need to be filled among other stuff with RAM? I wonder if at some point we will discover that there is a shortage of fibre optic cables of SFPs ...
PS: Obviously armchair economist here too ... but for it doesn't seem too difficult to foresee the increase of the demand.
Here’s the thing, what if memory manufacturers take this opportunity to collude and basically never reduce the price of memory below the current levels since it’s too hard for a new competitor to just rise up and undercut them? Everything I hear about is how hard and risky it is to spin up a new fab.
And by doing this, they ensure local LLMs never become feasible for the vast majority of people and AI companies solidify subscriptions forever.
Keeping prices at this level is precisely how one or more competitor will rise up. Making memory isn’t super hard. That’s why it is a commodity. The problem with the memory market is that up and down cycles have bankrupted the vast majority of players in the past. Now we only have 3 players left except for a few smaller ones in China.
The reason memory prices can stay high for years in this mega cycle is because the 3 players will be very cautious on overbuilding. They’d rather under build, make great profit (not maximum) and reduce the risk of going bust if this suddenly ends.
Same for TSMC in chips.
Great opportunity for Chinese companies though. This shortage is exactly what Chinese companies need to scale.
When Samsung had to sell memory at a loss after COVID, no one came to save them. They buffered their memory division using profits from their other businesses. That’s how Samsung survives memory downturns.
According to some stories, this is how Samsung convinced TSMC to not enter the memory business - that you need a nation or other lines of business to prevent bankruptcies.
You’re confusing two independent things. There are simple processes that are extremely capital intensive with long lead times and then there are complex processes that require lots of R&D and industry secrets. Memory is the former in the chip world.
Other examples from outside of tech of easy but capital intensive processes are power generation and railroads. Very easy to do, but easy to end up broken by overbuilding for demand that fails to materialize or stay stable for the duration of your financing.
If the collude to say make the price $1000 for a component that costs them $100(including opportunity costs), then either a new company or a greedy company in the collusion can make their price secretly $900 and get massively more profit.
Right now their opportunity cost is too high.
> risky it is to spin up a new fab
You don't need a new fab. You can build memory in 20 years old fab.
Corrupt doesn’t mean “acts without incentives”. If you assume a corrupt system, then the inputs are going to be who has influence over the DOJ. If there is more money to be made by breaking a cartel, then they would absolutely do it.
They will respond when people are loud enough. If memory stays at $1200 for 128GB for years and investigative journalists say it could be colluding, enough people will make enough noise.
I’m sure Nvidia, Elon, Tim Cook, OpenAI, Anthropic are already whispering in Trump’s ears to do something.
An interesting implication of this is that AI inference and training has a path to a ~3x hardware cost reduction (and maybe ~2x total cost reduction) without any technical innovation whatsoever, we just need to wait for dram supply to meet demand (either by manufacturing scaling or just waiting for the current rate of manufacturing to fill the demand spike).
I bought 96GB of RAM a couple of years ago for ~$250. That same RAM now costs $1200!
I’m so mad I didn’t max out my main server when I had the chance. Used enterprise sticks were dirt cheap on eBay.
I paid $279 for crucial 96gb DDR5 5600 MHz SO-DIMM ram October 22 of last year. Amazon has the same kit going for $1,048.90 right now.
Nice, you were lucky. =3
Ramflation
I bought a couple of used computers with 256 GB of DDR 4 (total) a year ago. The ram is worth more than I paid for the whole machines now.
Makes prior assumptions that getting tens of gigs of ram is cheap thrown out the window. Would likely lead to super fast SSDs such as optain being way more valuable
It is one of the thing with consumer when they remember they brought it at the absolutely lowest price point when DRAM maker were bleeding money.
Those are not normal pricing. Before the pricing collapse in early 2020, 96GB DDR5 would have cost about $450 to $500. And I will need to restate again the cost of DRAM hasn't really changed much in the past 20 years. Its price just goes up and down in cycles.
So in reality it is more like going from $500 to $1300. But consumer felt it was more like going from $200 to $1300.
Crucial are already selling DRAM made by CXMT. And China are already throwing money at it. I doubt the memory bubble will burst in next 12-24 months. As in going back to money losing DRAM pricing. As they will all pivot to HBM or other money making products. But the bulk of lower end consumer DDR5 or LPDDR5 will goes to Chinese Foundry. Assuming they have figure out how to do them well. Which they have improved but are still so far away from industry leaders.
Normally memory maker will push the next DDR standard to market just to push out Chinese competitors, I am not sure it will work the same this time around. DDR5 have plenty of other usage / demands.
> Crucial are already selling DRAM made by CXMT.
Crucial was disestablished this year.
He probably meant Corsair which is the DRAM brand selling CXMT produced chips.
Everything I read seems to suggest that RAM capacity is going to grow at 20-25% a year, which just doesn't seem good enough. Even in consumer use cases, phones and laptops would benefit greatly by double the amount of RAM. And then obviously, the AI need is gigantic.
I don't see it going away. I mean, it may not grow as fast as now, but I don't see it growing away either. I get why the memory makers do not want to bankrupt themselves, but it feels like there's got to be some way to push that risk off onto model providers and other people in the ecosystem to allow us to grow ram capacity more like 50% per year.
According to the recent article HBM memory is 3x less efficient wafer area wise than LPDDR; but the bandwidth is more than triple.
What if its in everyone's interest to buy computers at say 1/3rd the rate and switch everything over to HBM?
the discrepancy between compute and memory has been growing for ages, perhaps a painful switch to HBM is exactly what we need?
Would you rather have 3 intermediate computers with low memory bandwidth, or wait a little longer statistically so that we can all enjoy a new computer at 1/3rd the rate but much higher bandwidth than the area ratio?
I mean the biggest risk is Chinese CXML benefits and capturing markets that others are leaving hanging and then being able to compete and push out the others when costs start to normalize.
As for 20-25% growth not being enough, I think it's not that far off, if we assume data center build out plans hit a wall and slow down significantly, and the AI heat starts to cool off.
I don't think 20-25% may be enough in the short term but if the AI build out stops within this year, we have a massive oversupply instead of a under supply.
Is there any indication research is being focused on reducing menory footprint of inference for frontier class models? Is the low hanging fruit already gone there?
What is the risk? Competition is good for consumers.
The risk is to the business not the consumers
I really don’t want to give anyone ideas, but doesn’t this make the Nvidia 5090 an unbelievably good deal right now?
The VRAM in the 5090 is only made by one country in the world.
The 50xx series is special, because its ram is so dependent on a single commodity. It’s not like a 4090 or a 3090; their VRAM chips have been around for years.
If there’s a shortage or interruption in DDR7 VRAM, it seems like every GPU that requires it would explode in value.
I hope I don’t regret posting this because I’d really like to buy one myself…
An unbelievably good deal at $4000 plus?
Possibly the best deal there is
I really need to shut up, or bite the bullet and by one.
If you graph the tokens per second on the 5090, your jaw will hit the floor at how cheap it is
With only 32gb of vram, you can only run small/quantized models, in which case what's the point? At $4000, that gets you 20 months of 10x claude or chagpt subscriptions, which provide far better models. You'd need some use case where you can tolerate worse models, and use a steady supply of them. That doesn't match most people's usage patterns.
It's gone up like 300% in cost in the last year.
Which surely is the highest it'll ever be! You're suggesting that the price will go down in the future? Would love to hear more about your thought process!
Are you saying we're entering a period where tech increases in price instead of decreases? I guess it depends upon time horizon, but your statement isn't very specific.
I believe msrp is $2000 right?
There was only a very brief time it was selling for MSRP (last fall for $2000). Even if you use that as the previous data point, it's only 200% increased.
if you can buy one!
The RTX 5090 is faster than an H200. It just has less ram (32 vs 141), doesn't have NVLink, and technically isn't allowed to be used in a datacenter.
The datacenter GPUs sell at an 80% margin. They're incredibly overpriced. But the laws of supply and demand are undefeated and so here we all are.
> The RTX 5090 is faster than an H200. It just has less ram
H200 has HBM and much more 64-bit compute
It seems to me the max memory you can buy in a laptop stagnated for the past 3 years or so.
I have always felt insulted that most laptops even offer a low 4 GB of RAM I rather take 16 GB in previous gen memory
C
Bought a second hand Dell server a week ago. The entire rig with a 12-core CPU and 32GB DDR4 ecc RAM cost as much as I'd pay to buy 64 GB of DDR RAM alone. I hope there's an end to this absurdity soon enough otherwise the pain will affect other markets too. I read the other day that PC case sales have collapsed by more than 40%.
Poor people are already being priced out of cheap phones due to rise in RAM-related unit costs. https://www.cnet.com/tech/mobile/smartphone-sales-to-plummet...
I feel like by the time the AI bubble bursts the PC market will be irreparably damaged. Manufactures who have been making "enterprise" parts aren't going to go back to making consumer parts because there will be no market for it. And with a glut of datacenters not making any money on slop, they are going to be repurposed for saas, stuff like OnShape but for every application.
Most users don't seem to care about storing everything they generate in cloud services and this could easily be sold as an alternative to owning "expensive" desktop or laptop hardware.
They’re going to pivot to you renting desktop cloud compute instead of owning anything.
Enjoy your HP laptop subscription, it's all the computer you're going to get moving forward.
It's the reason I just build a new PC, despite the insane prices, I'd rather overpay than have reasonable prices but no stock to buy. With any luck I'll get 8-10 years out of this one and by then the PC landscape will be something else entirely.
Awful time for gamers and PC hobbyists not fully into AI.
This is 100% going to kill the home built pc market. When I started building gaming pcs, the top top card was 750$ (NZD). Now they’re 10,000 just for the gpu and another 1-2000 for ram.
People used to get into gaming pcs as an affordable hobby, now it’s making general aviation look like plan B.
Yes, this will definitely renew interest in Stadia type products.
It's more likely to kill the AI market. They're overbuilding capacity and most of it is going unused. The upcoming haircut is going to kill a lot of the major players.
They've intentionally crafted an unsustainable business model in an effort to get users in the front door and raise their MAUs. We've seen this story before. We should know precisely where it's headed.
Indeed, Gamers Nexus is doing interviews with PC component manufacturers, and some are hurting bad right now. The PC market is no longer in competition, but rather survival mode. =3
https://www.youtube.com/@GamersNexus/videos
also for ones fully into AI
I'm not moving past my DDR4 build (and the 32 GB of DDR4 2133 MHz backup chips I still have around from way back, before I got the current 3200 MHz ones) until the prices go back to being at least partially sane. This also means that CPU manufacturers are not getting my money (since the 5800X is fine for now) and I have no reason to get a new GPU either (though admittedly the B580 isn't perfect).
What if this is the lowest that prices will ever be?
I recently built a system at insane ddr4 prices ($2000 for 256gb). But that’s only after seeing how ddr5 prices were 3-4x that!
Yeah I upgraded all of my systems to DDR5 last year, so now I have to buy for ddr5 memory upgrades.
Had to fork over almost $1k for a 64G DDR5 kit a few weeks back. At least AMD chips large L3 cache allows folks to get away with lower grade udimms.
Also had to do an Intel build, and there was no way we were going cudimm at current prices. =3
Time to let ASML sell to the Chinese memory producers … or not.
It's still unclear to me: the shortage is semiconductor boules / wafers? or the shortage is semiconductor fab process step availability?
As long as the discussion seems focused on memory, I'd suspect the latter, but if its really the semiconductor boules/wafers, then I'd expect the boule growers to profit, not the memory makers, who just pass on the cost.
So which is it?
There is a good article (featured on HN a couple of days ago) that explains the issue: https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone
And that article is contradicting other voices. If that article were correctly identifying the bottleneck as wafer shortage due to switching to HBM, why is everybody discussing the memory makers instead of the boule growers. Memory makers can expand operations all they can, which makes no sense if wafer supply doesn't follow, and the article is suspicously light on semiconductor boule / wafer mfr's.
So which is the bottleneck: fabs or boule growing?
It’s fab capacity. Fwiw dram is different enough that fabs are not transferable between dram memory and other usages. It’s nice to think ‘wow if they made the current 10nm dram on the latest 2nm processes it’d be much faster’ but it doesn’t work that way. The specific size is needed for the capacitance. Sram can be made on fabs that make other circuitry since it’s transistor not capacitor based but is less dense.
Dram is just extremely specialised.
I wonder why the hyperscalers aren't vertically integrating more and building their own fabs. Sure, a fab costs a billion dollars, but they're currently spending hundreds of billions of dollars purchasing chips from NVidia and others.
I'm not sure if they should vertically integrate, it would probably be a better idea to directly fund the expansion of capacity, much like Apple does when they scale up a new technology for iPhones.
However, that the hyperscalers and AI companies aren't doing this says a lot about their true beliefs about how much future demand AI will have.
AI companies claim they will need a ton of massive expansion, but are unwilling to take on the risk of the capital needed for that expansion.
I'm hearing a lot of sad whining from AI folks about how these chip makers are holding them back, but who actually has the money to finance the expansion easily? Chip makers have been through this game far longer, when Sam Altman went around claiming it was time for $7T of fabs the AI companies made it clear that they were willing to make ridiculous claims, eliminating credibility.
What's needed now is for them to funnel a tiny amount of their massive piles of cash into financing fabs directly.
A fab takes years to build even when you have the necessary know-how. If you don't it'll take some additional experimenting before you can compete with the established manufacturers. By the time you can produce a usable chip the shortage might be over.
I assume that memory manufacturers don’t really care where the money is coming from, as long as the "numbers go up" game is working.
NVIDIA in their recent quarterly report stopped categorizing "Geforce" as a single category, and merged it into "Edge-Computing".
If you are a PC Gamer or PC Enthusiast as I am, then we have some dark times ahead.
Do we though? DLSS 5 changes that somewhat from a “we need powah” to “we need models”. I think the future consumer GPU market will be tuned for image and world inference while workstation cards will be tuned for image and video inference. The old way of thinking about this will come to an end when we stop looking at the render loop as the be-all-end-all…
Or, we could be fucked.
If DLSS 5 becomes the norm it's possible that just makes things worse. The DLSS 5 demos required an entire separate card to run the model, though IIRC NVIDIA did claim it would eventually work on a single card. Given what the model is doing (yassifying the whole scene instead of just upscaling/reconstructing) it makes sense to me that it would increase compute demand instead of reduce it like previous versions of DLSS.
I wish I had figured that out a year ago. MU up ~10x, SNDK up ~37x. My crystal ball is woefully under performing.
A commodity rapidly increasing in price. What could go wrong?
The algorithm advances are going to crash this so hard.
Or will more efficient algorithms just mean we run even more AI models, increasing the demand for AI chips even more?
I mean, god willing, but it'll be just as likely that we'll blissfully consume 100 million token contexts in that case.
isn't there a law for that? as things become cheaper you consume more?
You're probably thinking about jevons paradox. But you slightly mis-stated. It is the phenomenon that increasing the efficiency of resource consumption can end up increasing total consumption.
As you stated it, it would merely be a property of (nearly) all demand curves. Jevons paradox only happens sometimes. It isn't a law.
An example of where it stopped happening is with gasoline in developed countries. Cars having better fuel efficiency doesn’t make me drive further to the grocery store or work.
Generally when someone replaces their vehicle the new one is more fuel efficient than the old one even if I bought the same car.
Jevons paradox: https://en.wikipedia.org/wiki/Jevons_paradox
Jevons paradox.
https://en.wikipedia.org/wiki/Jevons_paradox
jevons paradox
Why did this happen so suddenly?
Why were tech savy investors unable to figure this out when the datacenter craze had already started?
How to explain this lag between quickly rising demand for all datacenter components besides memory?
Nine years after Google's seminal paper lit the fuse on AI, a total lack of manufacturing foresight has trapped over a trillion dollars of incoming capital in a hardware bottleneck.
The entire sector is now facing a critical RAM starvation crisis where memory manufacturers are actively slow-rolling supply just to keep prices high and avoid running out entirely.
This has created an unprecedented supply-and-demand distortion where desperate companies are getting rejected even at a 5x markup, and mission-critical SKUs are skyrocketing to 10x and 20x their baseline value.
It is a macroeconomic squeeze at a staggering scale, and the massive venture scale opportunity lies in capturing the value created by this memory gatekeeper.
From the perspective of an armchair economist, the winners will be the investors who invest in RAM wisely. The losers will likely be cash strapped SAAS companies. They’re almost completely dependent on a fleet of servers in the hyperscalers, and they’re leasing those servers and services. That leaves small SAAS companies exposed to incoming inflation in the cost of hosting.
Capex expenditure start exploding after covid with the chart going hockey stick at the end of 23/start of 24, almost 2.5 years ago.
A lot of capex is supposed to go into the datacentres, didn't they know that datacentres need to be filled among other stuff with RAM? I wonder if at some point we will discover that there is a shortage of fibre optic cables of SFPs ...
PS: Obviously armchair economist here too ... but for it doesn't seem too difficult to foresee the increase of the demand.
A lot of words to say that Sam Altman bought up the worlds total supply of ram chips for the next few years.
RAM is a boom-and-bust industry, so memory manufacturers were reluctant to invest. Here's a good blog post on the economics:
https://davidoks.blog/p/ai-is-killing-the-cheap-smartphone
Maybe long-term purchase agreements from big buyers might have helped convince them it's okay to build, but apparently it didn't happen.
The same reason they didn’t all sell everything to buy NVIDIA the day chatGPT came out
Anyone invested in Micron stock?
if we survive the bubble bursting and there isn't a "too big to fail" bailout with public money manipulation by bought politicians
we are going to have amazing cheap used hardware for a decade
Here’s the thing, what if memory manufacturers take this opportunity to collude and basically never reduce the price of memory below the current levels since it’s too hard for a new competitor to just rise up and undercut them? Everything I hear about is how hard and risky it is to spin up a new fab.
And by doing this, they ensure local LLMs never become feasible for the vast majority of people and AI companies solidify subscriptions forever.
Keeping prices at this level is precisely how one or more competitor will rise up. Making memory isn’t super hard. That’s why it is a commodity. The problem with the memory market is that up and down cycles have bankrupted the vast majority of players in the past. Now we only have 3 players left except for a few smaller ones in China.
The reason memory prices can stay high for years in this mega cycle is because the 3 players will be very cautious on overbuilding. They’d rather under build, make great profit (not maximum) and reduce the risk of going bust if this suddenly ends.
Same for TSMC in chips.
Great opportunity for Chinese companies though. This shortage is exactly what Chinese companies need to scale.
> Making memory isn’t super hard.
Then why do only 3 companies make it?
Bankruptcy risks.
When Samsung had to sell memory at a loss after COVID, no one came to save them. They buffered their memory division using profits from their other businesses. That’s how Samsung survives memory downturns.
According to some stories, this is how Samsung convinced TSMC to not enter the memory business - that you need a nation or other lines of business to prevent bankruptcies.
The market has stabilized to 3 players.
...And why do they go bankrupt?
Because it's an incredibly capital intensive process, involving billions of dollars of investment into manufacturing infrastructure.
That is to say, making memory is quite hard.
The technical process of making memory is relatively easy. Hence, it is a commodity.
I didn’t say owning a memory business is easy.
You’re confusing two independent things. There are simple processes that are extremely capital intensive with long lead times and then there are complex processes that require lots of R&D and industry secrets. Memory is the former in the chip world.
Other examples from outside of tech of easy but capital intensive processes are power generation and railroads. Very easy to do, but easy to end up broken by overbuilding for demand that fails to materialize or stay stable for the duration of your financing.
Making the memory can be much easier than predicting future demand.
Placing the bet isn't as hard as making an accurate prediction.
> up and down cycles have bankrupted the vast majority of players in the past
Exactly, so what’s the incentive for anyone to sink half a billy into building out more capacity.
The existing players get to rest on their laurels and succeed whether or not the AI bubble busts.
The incentive is that your 2 competitors will build more than you and gain market share on you if you are too conservative.
Samsung, SK Hynix, and Micron all have to balance between capex spending, making as much profit as possible, and risk of bankruptcy.
So are the new competitors currently in progress of starting up? Because it takes at least several years.
Only Chinese companies have a chance. Problem is that China can’t buy EUV machines and the most advanced memory chips now use EUV.
Heck, the US is now pressuring ASML to not sell even DUV machines to China, period.
When costs are high enough, you can recoup that, if you have an appetite for risking the downturn.
If the collude to say make the price $1000 for a component that costs them $100(including opportunity costs), then either a new company or a greedy company in the collusion can make their price secretly $900 and get massively more profit.
Right now their opportunity cost is too high.
> risky it is to spin up a new fab
You don't need a new fab. You can build memory in 20 years old fab.
Then that's a cartel and hopefully regulators will act.
They won’t.
They will. DOJ prosecuted memory makers in the late 90s and 2000s for collusion.
This boom is magnitudes higher than before. The attention will be endless.
Current DOJ is corrupt as fuck, it will not happen. Get back to reality.
Corrupt doesn’t mean “acts without incentives”. If you assume a corrupt system, then the inputs are going to be who has influence over the DOJ. If there is more money to be made by breaking a cartel, then they would absolutely do it.
They will respond when people are loud enough. If memory stays at $1200 for 128GB for years and investigative journalists say it could be colluding, enough people will make enough noise.
I’m sure Nvidia, Elon, Tim Cook, OpenAI, Anthropic are already whispering in Trump’s ears to do something.
> I’m sure Nvidia, Elon, Tim Cook, OpenAI, Anthropic are already whispering in Trump’s ears to do something
You can't expect me to believe that any of those would want any kind of antitrust action against anybody.
Sure they do. They all have money interests in this. They all want lower memory prices.
Once the masses are disenfranchised network state serfs according to plan, loudness won't matter
That was a very different DOJ. They no longer work for us. They act as Trump's personal law firm.
Then China will come and eat their lunch. I for one will only buy Chinese RAM from now on, no matter the prices.
>I for one will only buy Chinese RAM from now on, no matter the prices.
Memory is a commodity, so I think you will be very lonely in your quest.