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).
The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversupply will kill them. Instead, supply is just rerouted from less profitable segments such as mobile and personal computing.
Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
For lifespan, AWS is still running a ton of T4 GPUs from 2018, that power a lot of computer vision models. A ton of these will have a long life, not all ML is about frontier LLMs.
I wonder if we will see an adoption of alternative floating point formats. IEEE floats are notoriously terrible at lower widths (<= 16 bits). Floating point formats such as posits do much better at 16 or 8 bits. If you could train at 16 bits per value instead of 32, and suffer a much smaller inaccuracy penalty than you would from IEEE32 to IEEE16...
For some reason I still haven't heard any predictions on when new fabs will come online to meet the current demand. This shouldn't be too hard to find out, since the building time of fabs is very predictable process.
The difficult question is more whether foreseeable memory demand will remain at the current level, grow even further, or shrink again.
Supply will not meet demand. What incentive do the handful of dram manufacturers have to end the party? This is what happens when legal monopolies finally win control. Dont't worry. The patents will expire in a few decades. Our grandkids will see DDR5 get cheap again. The system functions as intended.
The up-front investment of a memory fab is measured in billions, and takes years to construct and get running. The margin on the chips themselves is terrible, so without scale its not worth even trying. DDR5 is a industry standard that takes some effort to conform to, but the licence fees is a drop in the bucket to the cost of creating a fab.
The fabricators were cautious about increasing production, and slow to start planning. It takes further time to build up capacity, and if the demand drops down, they may end up producing dram at a loss when the market flips over to oversupply. The demand whiplash could kill any company that dared betting on increasing production. See the "bullwhip effect" https://en.wikipedia.org/wiki/Bullwhip_effect which has killed semiconductor fabricators before.
There is a discussion to be had about how to maintain national semiconductor production in Europe and US as a strategic industry, but historic attempts have all failed.
I have fairly simplistic view of the economics involved here. Could you explain why the ability to sell more chips wouldn't be sufficient enough incentive to increase supply?
Not the person you’re replying to, but RAM has historically been a boom-or-bust business, and companies that invest to meet demand during a boom cycle usually have that new capacity come online just in time for the bust.
If it was just variable costs and new capacity was available today they’d do it. But there are substantial fixed costs and delays to increasing capacity, and that uncertainty makes it risky.
Bringing on new fabs takes many years and billions of dollars. You're exposing yourself to a lot of risk if you build now and find that the gold rush is over by the time your new capacity is online.
Probably, but at some point we're very likely to run out of significant training improvements and it's not clear that we'll see that point coming from a long way out.
Likewise it's probably dwarfed by improvements in how we make dram - continuing the roughly exponential (maybe a bit less recently) scaling of chips - but not necessarily.
The 2x from returning to previous costs is interesting because it's practically guaranteed, and it's on top of everything else. We're just currently "overpaying" (relative to the stable market price) for the manufacture of dram because of a sudden increase in demand.
Unless there's a new paradigm, scaling up is all they can do to improve performance. They've shrunk down all the way to 1-bit models and all the low-hanging fruit is gone. There's no way for them to get much smaller, so they have to get bigger and faster to meet expectations.
I bought 192GB of DDR3 a year ago for literally $60 ($5 a stick). It's about $22 a stick now, so more like $350 today. What on earth is _anybody_ doing with DDR3?
Demand for DDR3 is up because people who want DDR5 or DDR4 but can't afford either any more are choosing DDR3 and old DDR3-compatible systems to put it in, instead of what they really want.
All memory products use many shared resources in the supply chain, so if there is high demand in one product line, others have to raise prices to compete for the resources or stop making those lines altogether.
That is to say at least you were able to buy them at $350 today, with the current trajectory there will be no supply at all in few months.
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
My main computer has 64GB. I bought that one in late 2022 or so.
Looking at the current prices, even of the same RAM, is just
insane. Those companies really need to pay us compensation
damage here. The whole "free market" notion does not work
when you have de-facto monopolies and mega-corporations abuse
average Joe and average Jane.
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.
Historically the price has always trended downward. When I first got into computing $200 could buy you 128 MB (yes M) of ram. Really nice systems had 512 MB.
That's obviously changed over the decades as process shrinks have lead to higher memory density. We should generally expect that ram will cheaper up and until the point where process shrinks stop happening. They've definitely slowed, but they haven't stopped.
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.
The openai deal would be absorbed by two years of that. And it would be inefficient for the RAM makers in a competitive market to leave buyers unsold-to.
I don't actually know what the rate of growth before October was, I'm sure someone round here will though.
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.
Looking at the history of the memory industry the biggest risk is that a firm would over produce and go bankrupt. Maybe this time is different but so far no memory chip maker has gone under because their competition increased capacity.
I might be wrong but your second point can't be true if the first one is true.
Let me explain, imagine CXML grows massive and builds a lot of fabs, so much so that it becomes the leader in multiple segments, then the market demand cools off.
Then CXML the company that invested massively has oversupply so it undercuts every other memory company.
Aka, Samsung, SK Hynix are dead, and to protect Micron now US has 10000% tariff on the supply of memory.
Imagine. Because that has happened, if you don't play the boom and bust game someone will because the market is very large during a boom, and generally the player scaling more isn't the one with margins to protect and generally has the ability to undercut others.
Asian memory chip giants were made by under cutting European and American companies, American companies adapted by moving manufacturing to Asia, and European ones got bought for pennies or dissolved.
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?
Low hanging? how low hanging are we talking, the basic stuff is gone. Largely big challenges around quantization were solved 2 years ago, and we have just been improving from there.
But can massive gains still be made? Definitely.
The entire AI hype is based on the paper Attention is all you need, and Attention is basically loading a huge matrix of all the tokens in memory, how well you can optimize this attention layer is basically how most architectures are trying to solve for performance and memory usage.
Only one with significant gains in it is DeepSeek (or so I would like to believe because others don't make their work open for folks like me not in Big AI Labs to read). Their MLA architecture reduced KV-cache memory requirements by upto 90%, ofc that's purely architectural change.
With some quantization like Turboquant from google you could push it down to ~1/3 of that. So 96% memory savings when talking about kv-cache.
But the models are close to being saturated for quantization based memory optimizations. We will have to see some architectural changes for a significant shift now.
If they manage to make memory more efficient, they’ll just increase the context size and/or model size.
We just haven’t reached the diminishing return of gen AI capabilities yet.
Models will get more useful if you have higher context size or higher param size. Then people will just use the models even more, leading to even more memory demand.
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.
If you can do what you need with qwen3.6-27b, it starts to look really interesting. That model is crazy good for the size, but it's a pain tweaking the params to run it on a 4090 with decent context and decent token speed. A 5090 looks tasty from that point of view, and only more so if you think in terms of the probability of that model being roflstomped by something in the same weight class in the next couple of years. I reckon that probability is significantly non-zero, but fundamentally it's a guess.
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 $2000). Even if you use that as the previous data point, it's only 200% increased.
This is 100% going to kill the home built pc market. When I started building gaming pcs, the top top card was 750$ (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.
there's much more than triple A video-games running at 240 Hz on Ultra settings... a 200 USD laptop/computer has enough power to run hundreds of interesting indie games and AAA from the past
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 think it's the opposite. Sure in short term hobbyists are getting squeezed, but the amount of capital that they can put into pushing the edge is small compared to Fortune 500. Sooner or later hobbyists will benefit, especially if the market crashes.
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%.
If hyperscalers are using more RAM, and that RAM is not available for consumers, it means all the heavy stuff will happen in the cloud. Why would we want both the hyperscalers and consumers to have RAM simultaneously? Consumers would want more RAM to run local models but then hyperscalers capacity will be unused.
Because RAM isn’t in PCs only. It’s in tablets, phones, laptops, DIY computers like the Raspberry, mini PCs, watches, smart TVs, game consoles, cars, routers, cameras, all smart appliances from refrigerators to washing machines, fitness trackers, printers etc. Cloud services are irrelevant to most of these categories.
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.
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.
Oracle is getting sold because of how much capex they're spending on new data centers in the middle of a high rates environment. It's not like they're stockpiling cash due to doubting AI.
Oracle had not entered into my thoughts at all; I know they do some cloud stuff but they are in a very different position than OpenAI or Anthropic or Google.
Because fabs are about the most complex cutting edge technology out there: the "rocket science" of our day (or one of them). And merely having the money is not sufficient. It would be very easy to blow several billion dollars and end up with nothing to show for it.
Just look at how Intel has struggled to compete in recent years, and they have been in the business for decades.
Intel struggled because they bet the company that Moore's law was over back in ~2014, and instead of upgrading their fabs to EUV they sent the money back to shareholders.
They forgot Moore's main lesson: only the paranoid survive. They thought they could coast, and it nearly killed them.
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'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).
As Yogi Berra famously said, "It's tough to make predictions, especially about the future." But based on historical tech industry trends, a price increase in one component that's this rapid and extreme, is likely to eventually regress somewhat toward the long-term trend line - even if that trend line experiences a longer-term shift upward.
As always, some interpret certain recent events as reason to conclude "but this time it's different." Occasionally they are correct. But that doesn't change the fact that it's reasonable to assume some of the recent extreme, rapid price inflation is due to shorter term market distortion. It's also pretty clear that some of the recent increase in demand represents a stable increase in the long-term trendline. The question is how much is long-term stable and how much is short-term distortion.
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.
This covers it pretty well https://news.ycombinator.com/item?id=48229319, TLDR -memory for AI uses more wafers from same production line as other memory and is more profitable, building new fab very risky historically for companies.
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 asked for evidence different people keep feeding me opposite stories: one insists its not fab capacity but wafer competition, with a recent article claiming HBM3E takes 3 times as much wafer area per bit than LPDDR5X. Others tell me the complete opposite: its fab capacity, not wafer shortage.
Do we have citable references to ground either set of claims?
I believe those are two ways of describing the same thing. If you're able to book some fab capacity, that means you get to decide what the fab does with the next wafers in the queue.
From your sibling comment, I think you're interpreting the 3x HBM stat as contributing to making wafers scarce. It's more that the next wafer to be processed in a fab is especially precious, making the opportunity cost larger. The beach sand remains plentiful.
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?
also consider how most solar panels are monocrystalline silicon, how credible is silicon wafer shortage ... really? there is so much disinformation in this market...
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…
From my point of view, I suppose we will enter a "Let AI generate entertainment" era. In which you just might rent everything, including games. No need for a beefy computer at home, you just need a slim endpoint:
"Order yours now, for just $99.99 per month, hardware included! Order today, and you will get three months of 'Office Suite' for free, with a small additional cost of $49.99 after month 4. On a tight budget? Switch to the yearly subscription, and pay comfortably in 18 installments."
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 think the companies that drive up the prices here, need
to pay an extra-tax to all of us. I fail to see why I now
have to pay more due to the AI monster companies ruining
the economy.
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.
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.
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.
I heard Greg Brockman on a podcast saying they are limited by computer and memory. They have line of sight in solving many different kinds of problems. But they also have to survive in the meantime. Hence the focus on enterprise recently. They could just ask Government to fund them doing other research areas
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.
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).
The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversupply will kill them. Instead, supply is just rerouted from less profitable segments such as mobile and personal computing.
China is about to flood the market and prove this notion wrong. If there is demand they want to meet it with supply.
But to your point, that is exactly how American companies like to play now. No one is stopping them from screwing over the consumer.
I have a Micron near me and they are building another chip facility but we are years away still so I suspect China will beat them to the punch.
Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
Apple could always decide to build their own fab or some such thing.
It sure looks like Sam Altman's masterful gambit to corner the memory market has had unforeseen consequences.
What’s the lifespan/refurbishability of the capex elements like the “GPU” modules or even the DRAM soldered into them?
For lifespan, AWS is still running a ton of T4 GPUs from 2018, that power a lot of computer vision models. A ton of these will have a long life, not all ML is about frontier LLMs.
I wonder if we will see an adoption of alternative floating point formats. IEEE floats are notoriously terrible at lower widths (<= 16 bits). Floating point formats such as posits do much better at 16 or 8 bits. If you could train at 16 bits per value instead of 32, and suffer a much smaller inaccuracy penalty than you would from IEEE32 to IEEE16...
For some reason I still haven't heard any predictions on when new fabs will come online to meet the current demand. This shouldn't be too hard to find out, since the building time of fabs is very predictable process.
The difficult question is more whether foreseeable memory demand will remain at the current level, grow even further, or shrink again.
Supply will not meet demand. What incentive do the handful of dram manufacturers have to end the party? This is what happens when legal monopolies finally win control. Dont't worry. The patents will expire in a few decades. Our grandkids will see DDR5 get cheap again. The system functions as intended.
Patents is not the issue here. Not even close.
The up-front investment of a memory fab is measured in billions, and takes years to construct and get running. The margin on the chips themselves is terrible, so without scale its not worth even trying. DDR5 is a industry standard that takes some effort to conform to, but the licence fees is a drop in the bucket to the cost of creating a fab.
The fabricators were cautious about increasing production, and slow to start planning. It takes further time to build up capacity, and if the demand drops down, they may end up producing dram at a loss when the market flips over to oversupply. The demand whiplash could kill any company that dared betting on increasing production. See the "bullwhip effect" https://en.wikipedia.org/wiki/Bullwhip_effect which has killed semiconductor fabricators before.
There is a discussion to be had about how to maintain national semiconductor production in Europe and US as a strategic industry, but historic attempts have all failed.
I have fairly simplistic view of the economics involved here. Could you explain why the ability to sell more chips wouldn't be sufficient enough incentive to increase supply?
Not the person you’re replying to, but RAM has historically been a boom-or-bust business, and companies that invest to meet demand during a boom cycle usually have that new capacity come online just in time for the bust.
If it was just variable costs and new capacity was available today they’d do it. But there are substantial fixed costs and delays to increasing capacity, and that uncertainty makes it risky.
Bringing on new fabs takes many years and billions of dollars. You're exposing yourself to a lot of risk if you build now and find that the gold rush is over by the time your new capacity is online.
> a path to a ~3x hardware cost reduction
Really?
How long do we have to wait until that ... cost reduction hits us?
For supply to meet demand. Depends very much on how aggressively producers scale and on how demand grows or shrinks.
Safe to say at least a year or two. It'd be shocking if it took a decade.
2-3x is completely dwarfed by the remaining improvements in training which is still in its infancy relatively
Probably, but at some point we're very likely to run out of significant training improvements and it's not clear that we'll see that point coming from a long way out.
Likewise it's probably dwarfed by improvements in how we make dram - continuing the roughly exponential (maybe a bit less recently) scaling of chips - but not necessarily.
The 2x from returning to previous costs is interesting because it's practically guaranteed, and it's on top of everything else. We're just currently "overpaying" (relative to the stable market price) for the manufacture of dram because of a sudden increase in demand.
Unless there's a new paradigm, scaling up is all they can do to improve performance. They've shrunk down all the way to 1-bit models and all the low-hanging fruit is gone. There's no way for them to get much smaller, so they have to get bigger and faster to meet expectations.
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.
Used enterprise HDD’s also jacked up now. It’s absurd lol
Yep mad about that too. I was about half way through upgrading my 45 drives server when they started to go up.
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
I bought 192GB of DDR3 a year ago for literally $60 ($5 a stick). It's about $22 a stick now, so more like $350 today. What on earth is _anybody_ doing with DDR3?
Demand for DDR3 is up because people who want DDR5 or DDR4 but can't afford either any more are choosing DDR3 and old DDR3-compatible systems to put it in, instead of what they really want.
All memory products use many shared resources in the supply chain, so if there is high demand in one product line, others have to raise prices to compete for the resources or stop making those lines altogether.
That is to say at least you were able to buy them at $350 today, with the current trajectory there will be no supply at all in few months.
Being desperate?
I just found two 4tb Samsung EVO drives - unused - while organizing my garage.
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
The price of SSDs is similarly depressing.
2x16gb for $105 total April of 2025. $600 for that now. Makes no sense.
My main computer has 64GB. I bought that one in late 2022 or so.
Looking at the current prices, even of the same RAM, is just insane. Those companies really need to pay us compensation damage here. The whole "free market" notion does not work when you have de-facto monopolies and mega-corporations abuse average Joe and average Jane.
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.
Ramflation
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.
> Its price just goes up and down in cycles.
Historically the price has always trended downward. When I first got into computing $200 could buy you 128 MB (yes M) of ram. Really nice systems had 512 MB.
That's obviously changed over the decades as process shrinks have lead to higher memory density. We should generally expect that ram will cheaper up and until the point where process shrinks stop happening. They've definitely slowed, but they haven't stopped.
> 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.
Ah, the old decrucialisestablishmentarianism.
I found the phrasing weird myself, I quoted wikipedia
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.
The openai deal would be absorbed by two years of that. And it would be inefficient for the RAM makers in a competitive market to leave buyers unsold-to.
I don't actually know what the rate of growth before October was, I'm sure someone round here will though.
In theory the new futures markets for chip components would help here, since it would allow DRAM suppliers to insulate themselves from that risk.
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?
These are fundamentally different points in design space though, hbm doesn’t have a 10mw idle draw like lpddr does.
Not many workloads are RAM bandwidth limited. Power and latency are much more common bottlenecks, and HBM loses on both of those.
Isn’t memory bandwidth super relevant for AI?
Can’t put HBM in smartphones and laptops. The power drain is too great.
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.
Looking at the history of the memory industry the biggest risk is that a firm would over produce and go bankrupt. Maybe this time is different but so far no memory chip maker has gone under because their competition increased capacity.
I might be wrong but your second point can't be true if the first one is true.
Let me explain, imagine CXML grows massive and builds a lot of fabs, so much so that it becomes the leader in multiple segments, then the market demand cools off.
Then CXML the company that invested massively has oversupply so it undercuts every other memory company.
Aka, Samsung, SK Hynix are dead, and to protect Micron now US has 10000% tariff on the supply of memory.
Imagine. Because that has happened, if you don't play the boom and bust game someone will because the market is very large during a boom, and generally the player scaling more isn't the one with margins to protect and generally has the ability to undercut others.
Asian memory chip giants were made by under cutting European and American companies, American companies adapted by moving manufacturing to Asia, and European ones got bought for pennies or dissolved.
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?
Low hanging? how low hanging are we talking, the basic stuff is gone. Largely big challenges around quantization were solved 2 years ago, and we have just been improving from there.
But can massive gains still be made? Definitely.
The entire AI hype is based on the paper Attention is all you need, and Attention is basically loading a huge matrix of all the tokens in memory, how well you can optimize this attention layer is basically how most architectures are trying to solve for performance and memory usage.
Only one with significant gains in it is DeepSeek (or so I would like to believe because others don't make their work open for folks like me not in Big AI Labs to read). Their MLA architecture reduced KV-cache memory requirements by upto 90%, ofc that's purely architectural change.
With some quantization like Turboquant from google you could push it down to ~1/3 of that. So 96% memory savings when talking about kv-cache.
But the models are close to being saturated for quantization based memory optimizations. We will have to see some architectural changes for a significant shift now.
If they manage to make memory more efficient, they’ll just increase the context size and/or model size.
We just haven’t reached the diminishing return of gen AI capabilities yet.
Models will get more useful if you have higher context size or higher param size. Then people will just use the models even more, leading to even more memory demand.
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.
If you can do what you need with qwen3.6-27b, it starts to look really interesting. That model is crazy good for the size, but it's a pain tweaking the params to run it on a 4090 with decent context and decent token speed. A 5090 looks tasty from that point of view, and only more so if you think in terms of the probability of that model being roflstomped by something in the same weight class in the next couple of years. I reckon that probability is significantly non-zero, but fundamentally it's a guess.
Or you want to process private data or don’t have reliable connectivity. There are a few more reasons for local models I think.
Also, electricity isn't free.
The 5090 is crap for inference. Unless you like dummy models, sure they will run at light speed. All the rage is MoE with 500B-1T weights nowadays.
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 $2000). Even if you use that as the previous data point, it's only 200% increased.
if you can buy one!
The RTX 5090 is faster than an H200. It just has less ram (32 vs 141), doesn't have NVLink, and technically isn't allowed to be used in a datacenter.
The datacenter GPUs sell at an 80% margin. They're incredibly overpriced. But the laws of supply and demand are undefeated and so here we all are.
> The RTX 5090 is faster than an H200. It just has less ram
H200 has HBM and much more 64-bit compute
Let me try again.
RTX 5090 has more CUDA cores that run at a higher clock speed. H200 has more RAM and significantly more RAM bandwidth.
Which one is net faster depends on your use case. But you may be very surprised that many workflows are faster on an RTX 5090!
Awful time for gamers and PC hobbyists not fully into AI.
This is 100% going to kill the home built pc market. When I started building gaming pcs, the top top card was 750$ (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.
there's much more than triple A video-games running at 240 Hz on Ultra settings... a 200 USD laptop/computer has enough power to run hundreds of interesting indie games and AAA from the past
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.
Don’t you worry - Microsoft and Amazon will have you covered with cloud streaming.
Can’t afford a computer because they bought up all the supply? They’ll conveniently sell it back to you with a subscription!
You’ll own nothing and be happy.
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
I think it's the opposite. Sure in short term hobbyists are getting squeezed, but the amount of capital that they can put into pushing the edge is small compared to Fortune 500. Sooner or later hobbyists will benefit, especially if the market crashes.
I fully agree, the billion dollar question is when it will come.
If it crashes after it kills the PC we’ll be left with… nothing? Path matters as much as destination
also for ones fully into AI
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...
It makes me sad for the Neo 2.0. More ram is the only thing stopping me switching to it from a Pro.
I have an alternative take.
If hyperscalers are using more RAM, and that RAM is not available for consumers, it means all the heavy stuff will happen in the cloud. Why would we want both the hyperscalers and consumers to have RAM simultaneously? Consumers would want more RAM to run local models but then hyperscalers capacity will be unused.
Because RAM isn’t in PCs only. It’s in tablets, phones, laptops, DIY computers like the Raspberry, mini PCs, watches, smart TVs, game consoles, cars, routers, cameras, all smart appliances from refrigerators to washing machines, fitness trackers, printers etc. Cloud services are irrelevant to most of these categories.
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.
“Bubble”
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.
A fab costs a billion dollars (really a lot more) and 5 years. It doesn't do anything for anyone today.
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.
Oracle is getting sold because of how much capex they're spending on new data centers in the middle of a high rates environment. It's not like they're stockpiling cash due to doubting AI.
Oracle had not entered into my thoughts at all; I know they do some cloud stuff but they are in a very different position than OpenAI or Anthropic or Google.
Because fabs are about the most complex cutting edge technology out there: the "rocket science" of our day (or one of them). And merely having the money is not sufficient. It would be very easy to blow several billion dollars and end up with nothing to show for it.
Just look at how Intel has struggled to compete in recent years, and they have been in the business for decades.
Intel struggled because they bet the company that Moore's law was over back in ~2014, and instead of upgrading their fabs to EUV they sent the money back to shareholders.
They forgot Moore's main lesson: only the paranoid survive. They thought they could coast, and it nearly killed them.
> They forgot Moore's main lesson: only the paranoid survive.
"Only the Paranoid Survive" is rather a quote and book title by Andrew S. Grove.
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'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?
As Yogi Berra famously said, "It's tough to make predictions, especially about the future." But based on historical tech industry trends, a price increase in one component that's this rapid and extreme, is likely to eventually regress somewhat toward the long-term trend line - even if that trend line experiences a longer-term shift upward.
As always, some interpret certain recent events as reason to conclude "but this time it's different." Occasionally they are correct. But that doesn't change the fact that it's reasonable to assume some of the recent extreme, rapid price inflation is due to shorter term market distortion. It's also pretty clear that some of the recent increase in demand represents a stable increase in the long-term trendline. The question is how much is long-term stable and how much is short-term distortion.
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
It seems to me the max memory you can buy in a laptop stagnated for the past 3 years or so.
My several years old laptop has 128GB of RAM, is that not enough? I admit that it's a pretty heavy one.
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
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?
This covers it pretty well https://news.ycombinator.com/item?id=48229319, TLDR -memory for AI uses more wafers from same production line as other memory and is more profitable, building new fab very risky historically for companies.
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 know the differences between SRAM, DRAM, ...
I asked for evidence different people keep feeding me opposite stories: one insists its not fab capacity but wafer competition, with a recent article claiming HBM3E takes 3 times as much wafer area per bit than LPDDR5X. Others tell me the complete opposite: its fab capacity, not wafer shortage.
Do we have citable references to ground either set of claims?
I believe those are two ways of describing the same thing. If you're able to book some fab capacity, that means you get to decide what the fab does with the next wafers in the queue.
From your sibling comment, I think you're interpreting the 3x HBM stat as contributing to making wafers scarce. It's more that the next wafer to be processed in a fab is especially precious, making the opportunity cost larger. The beach sand remains plentiful.
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?
also consider how most solar panels are monocrystalline silicon, how credible is silicon wafer shortage ... really? there is so much disinformation in this market...
As models gain efficiency, will the need for ram cool?
They’ll just fill up the ram with bigger models. Demand will INCREASE, not decrease.
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.
From my point of view, I suppose we will enter a "Let AI generate entertainment" era. In which you just might rent everything, including games. No need for a beefy computer at home, you just need a slim endpoint:
"Order yours now, for just $99.99 per month, hardware included! Order today, and you will get three months of 'Office Suite' for free, with a small additional cost of $49.99 after month 4. On a tight budget? Switch to the yearly subscription, and pay comfortably in 18 installments."
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.
Time to let ASML sell to the Chinese memory producers … or not.
I wish I had figured that out a year ago. MU up ~10x, SNDK up ~37x. My crystal ball is woefully under performing.
I think the companies that drive up the prices here, need to pay an extra-tax to all of us. I fail to see why I now have to pay more due to the AI monster companies ruining the economy.
A commodity rapidly increasing in price. What could go wrong?
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.
"That leaves small SAAS companies exposed to incoming inflation in the cost of hosting".
Which they will pass on to their customers. If their product provides enough value the customers will pay.....
A lot of words to say that Sam Altman bought up the worlds total supply of ram chips for the next few years.
A dick move or just really prescient?
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.
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
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.
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.
Memory prices and shortages directly impact all of their profit margins and revenue.
Once the masses are disenfranchised network state serfs according to plan, loudness won't matter
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.
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.
Anyone invested in Micron stock?
Up 700% in a year.
WallstreeetBets has been disturbingly accurate in its predictions - basically anything related to AI.
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 heard Greg Brockman on a podcast saying they are limited by computer and memory. They have line of sight in solving many different kinds of problems. But they also have to survive in the meantime. Hence the focus on enterprise recently. They could just ask Government to fund them doing other research areas
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
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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