7 ms·

The big news story this cycle is that OpenAI secured two large contracts with two separate DRAM companies at the same time, carefully timing the deals so that n

The big news story this cycle is that OpenAI secured two large contracts with two separate DRAM companies at the same time, carefully timing the deals so that neither DRAM company knew about the deal with other. Had either company known about the true demand from OpenAI they would have charged a lot more, but each only saw about half. In other words, there was no collusion between the DRAM manufacturers. They were both caught off guard and left a lot of money on the table. The current price increase is the result of the huge demand spike. Production takes years to ramp up, but demand has spiked rapidly. Supply and demand.

pmontra 1y ago
And when demand eventually crashes, all the new production capacity is left without buyers to sell to, so maybe it does not even make sense to create it.
- imtringued 1y ago
  There won't be any new production capacity until DDR6 comes out. There is no point in investing into an obsolete technology like DDR5.
  - nebula8804 1y ago
    China will happily take that business. They are producing DRAM now arent they?
    - amarcheschi 1y ago
      Yes https://www.techpowerup.com/343185/chinese-cxmt-shows-homegrown-ddr5-8000-and-lpddr5x-10667-memory https://www.techpowerup.com/343185/chinese-cxmt-shows-homegr...
    - kasabali 1y ago
      unfortunately not too promising: https://www.reuters.com/commentary/breakingviews/chinas-chip-champions-miss-their-cue-2025-12-02/ https://www.reuters.com/commentary/breakingviews/chinas-chip... I wish they didn't stop producing DDR4, at least they'd be the sole producer of that.
cm2187 1y ago
One difference that strikes me with the .com bubble is that I don't remember the .com companies having sustained multi-billions losses / cash burn. They were not profitable but this is quite different. If (or when) the music stops, won't OpenAI go bust immediately? That's quite a counterparty risk those companies are taking.
- PeterStuer 1y ago
  They are counting on 'too big to fail'.
- kolinko 1y ago
  OpenAI is ten years old, dotcom companies were 2-3 years old. Some dotcom-boom companies that survived also had sustained multi billion dollar losses afair - Amazon and Uber for example.
  - cedilla 1y ago
    Uber was founded half a decade after the dot com bubble.
    - Dylan16807 1y ago
      "half" confused me but okay 2001 and 2009 makes sense.
- energy123 1y ago
  I believe we'd have to tease out what proportion of that cash burn is essential to keep serving compute to customers (which I assume to have profitable unit economics), versus what percentage is optional datacenter buildouts that could be paused in this situation.
- pjc50 1y ago
  Massive cash burn was an absolutely key feature of the dotcom boom/bust. Admittedly, it never really went away - there's always been a free->enshittification profit taking cycle since then. It's just the scale that's terrifyingly different this time.
PeterStuer 1y ago
You have to wonder whether they realy intend to use the ram, or they just spotted an opportunity to corner an essential market and choke/extort in resale.
- nebula8804 1y ago
  Do they have the extra money to play games like that? I thought they were pulling back on ads because of the community reaction even though they wouldn't be introducing it now unless they needed it.
  - PeterStuer 11mo ago
    Money is like energy. You can flow it around a circuit if resistance is low.
- FinnKuhn 1y ago
  I feel like what OpenAI has started to do was to accumulate as much compute resources as possible just so no one else has them.
- Aerroon 1y ago
  I'm wondering this as well. Buying 40% of global production just sounds too much. What kind of user counts would they require for that much compute to pay off? Billions of people? What's the chance they could actually get that many users and charge them money? Zero?
- kasabali 1y ago
  > Right now it seems like these wafers will just be stockpiled in warehouses – like a kid who hides the toybox because they’re afraid nobody wants to play with them, and thus selfishly feels nobody but them should get the toys! https://www.mooreslawisdead.com/post/sam-altman-s-dirty-dram-deal https://www.mooreslawisdead.com/post/sam-altman-s-dirty-dram...
nebula8804 1y ago
They are not going to repeat the Windows 8 debacle again are they? (Over producing in response to perceived demand only to not get the demand when they are ready to sell) Didn't that bankrupt some memory manufacturers?
AndrewDavis 1y ago
To those who haven't heard how colossal the size of OpenAIs contracts are. 900,000 wafers monthly. Tom's hardware estimates that is equal to 40% of global dram production capacity. https://www.tomshardware.com/pc-components/dram/openais-stargate-project-to-consume-up-to-40-percent-of-global-dram-output-inks-deal-with-samsung-and-sk-hynix-to-the-tune-of-up-to-900-000-wafers-per-month https://www.tomshardware.com/pc-components/dram/openais-star...
- 01HNNWZ0MV43FF 1y ago
  At that point even if the AI bubble bursts you have a solid business as a RAM scalper
  - jack_tripper 1y ago
    You mean OpenAI will profit selling their RAM stocks if the AI bubble bursts? I doubt it honestly. If the AI bubble bursts, then global demand will collapse altogether crashing the value of HW.
    - euroderf 1y ago
      Free GPUs for everyone! Bring a truck!
      - amarcheschi 1y ago
        I honestly can't wait to use used gpus as lego bricks similar to what kids in Weimar republic did with cash
        jack_pp 1y ago
        Never gonna happen. Cash has no intrinsic value exccept maybe for use in fire / toiler paper. GPUs while currently inflated in price will always find enough value. Their price might go down 50-75% but never 99%
redwood 1y ago
I find it very hard to believe that two South Korea based Chaebol memory producers would have no wind of this from the other.. more likely is that they both agree that it is not in their or the nation's interest to take on too much of a risk profile... while also balancing the risk of appearing to be colluding.
- davey48016 1y ago
  I wonder if they caught wind, but they both thought they were competing for the same contract.
  - redwood 1y ago
    Another way of making the point I'm making is you don't become one of the two leading memory producing capable companies in the world by being naive
- llama052 1y ago
  It's more advantageous long term for them to be oblivious to it. Ultimately gives them what they want which is reduced supply and increased pricing for them.
bigbadfeline 1y ago
> Supply and demand. Fake demand - fueled by ponzi debt financed by other debt. Oh, forgot to mention - fake supply too. China was doubly-excluded from the RAM market by using both equipment export bans and tariffs - ensuring the supply is frozen solid. I'm pretty sure this isn't a coincidence or due to incompetence.

pmontra 1y ago

And when demand eventually crashes, all the new production capacity is left without buyers to sell to, so maybe it does not even make sense to create it.

imtringued 1y ago
There won't be any new production capacity until DDR6 comes out. There is no point in investing into an obsolete technology like DDR5.
- nebula8804 1y ago
  China will happily take that business. They are producing DRAM now arent they?
  - amarcheschi 1y ago
    Yes https://www.techpowerup.com/343185/chinese-cxmt-shows-homegrown-ddr5-8000-and-lpddr5x-10667-memory https://www.techpowerup.com/343185/chinese-cxmt-shows-homegr...
  - kasabali 1y ago
    unfortunately not too promising: https://www.reuters.com/commentary/breakingviews/chinas-chip-champions-miss-their-cue-2025-12-02/ https://www.reuters.com/commentary/breakingviews/chinas-chip... I wish they didn't stop producing DDR4, at least they'd be the sole producer of that.

cm2187 1y ago

One difference that strikes me with the .com bubble is that I don't remember the .com companies having sustained multi-billions losses / cash burn. They were not profitable but this is quite different. If (or when) the music stops, won't OpenAI go bust immediately? That's quite a counterparty risk those companies are taking.

PeterStuer 1y ago
They are counting on 'too big to fail'.
kolinko 1y ago
OpenAI is ten years old, dotcom companies were 2-3 years old. Some dotcom-boom companies that survived also had sustained multi billion dollar losses afair - Amazon and Uber for example.
- cedilla 1y ago
  Uber was founded half a decade after the dot com bubble.
  - Dylan16807 1y ago
    "half" confused me but okay 2001 and 2009 makes sense.
energy123 1y ago
I believe we'd have to tease out what proportion of that cash burn is essential to keep serving compute to customers (which I assume to have profitable unit economics), versus what percentage is optional datacenter buildouts that could be paused in this situation.
pjc50 1y ago
Massive cash burn was an absolutely key feature of the dotcom boom/bust. Admittedly, it never really went away - there's always been a free->enshittification profit taking cycle since then. It's just the scale that's terrifyingly different this time.

PeterStuer 1y ago

You have to wonder whether they realy intend to use the ram, or they just spotted an opportunity to corner an essential market and choke/extort in resale.

nebula8804 1y ago
Do they have the extra money to play games like that? I thought they were pulling back on ads because of the community reaction even though they wouldn't be introducing it now unless they needed it.
- PeterStuer 11mo ago
  Money is like energy. You can flow it around a circuit if resistance is low.
FinnKuhn 1y ago
I feel like what OpenAI has started to do was to accumulate as much compute resources as possible just so no one else has them.
Aerroon 1y ago
I'm wondering this as well. Buying 40% of global production just sounds too much. What kind of user counts would they require for that much compute to pay off? Billions of people? What's the chance they could actually get that many users and charge them money? Zero?
kasabali 1y ago
> Right now it seems like these wafers will just be stockpiled in warehouses – like a kid who hides the toybox because they’re afraid nobody wants to play with them, and thus selfishly feels nobody but them should get the toys! https://www.mooreslawisdead.com/post/sam-altman-s-dirty-dram-deal https://www.mooreslawisdead.com/post/sam-altman-s-dirty-dram...

nebula8804 1y ago

They are not going to repeat the Windows 8 debacle again are they? (Over producing in response to perceived demand only to not get the demand when they are ready to sell) Didn't that bankrupt some memory manufacturers?

AndrewDavis 1y ago

To those who haven't heard how colossal the size of OpenAIs contracts are. 900,000 wafers monthly. Tom's hardware estimates that is equal to 40% of global dram production capacity. https://www.tomshardware.com/pc-components/dram/openais-stargate-project-to-consume-up-to-40-percent-of-global-dram-output-inks-deal-with-samsung-and-sk-hynix-to-the-tune-of-up-to-900-000-wafers-per-month https://www.tomshardware.com/pc-components/dram/openais-star...

01HNNWZ0MV43FF 1y ago
At that point even if the AI bubble bursts you have a solid business as a RAM scalper
- jack_tripper 1y ago
  You mean OpenAI will profit selling their RAM stocks if the AI bubble bursts? I doubt it honestly. If the AI bubble bursts, then global demand will collapse altogether crashing the value of HW.
  - euroderf 1y ago
    Free GPUs for everyone! Bring a truck!
    - amarcheschi 1y ago
      I honestly can't wait to use used gpus as lego bricks similar to what kids in Weimar republic did with cash
      - jack_pp 1y ago
        Never gonna happen. Cash has no intrinsic value exccept maybe for use in fire / toiler paper. GPUs while currently inflated in price will always find enough value. Their price might go down 50-75% but never 99%

redwood 1y ago

I find it very hard to believe that two South Korea based Chaebol memory producers would have no wind of this from the other.. more likely is that they both agree that it is not in their or the nation's interest to take on too much of a risk profile... while also balancing the risk of appearing to be colluding.

davey48016 1y ago
I wonder if they caught wind, but they both thought they were competing for the same contract.
- redwood 1y ago
  Another way of making the point I'm making is you don't become one of the two leading memory producing capable companies in the world by being naive
llama052 1y ago
It's more advantageous long term for them to be oblivious to it. Ultimately gives them what they want which is reduced supply and increased pricing for them.

bigbadfeline 1y ago

> Supply and demand. Fake demand - fueled by ponzi debt financed by other debt. Oh, forgot to mention - fake supply too. China was doubly-excluded from the RAM market by using both equipment export bans and tariffs - ensuring the supply is frozen solid. I'm pretty sure this isn't a coincidence or due to incompetence.