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There's clearly easy/irrational money distorting the markets here. Normally this wouldn't be a problem: prices would go up, supply would eventually increase and

by glimshe 8mo ago

There's clearly easy/irrational money distorting the markets here. Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay. But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies. Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI.

appreciatorBus 8mo ago
Regardless where demand comes from, it takes time to spin up a hard drive factory, and prices would have to rise enough that, as a producer, you would feel confident that a new hard drive factory will actually pay off. Conversely, if you feel that boom is irrational and temporary, as a producer you’d be quite wary of investing money in a new factory if there was a risk it would be producing into a glut in a few years.
- anonymars 8mo ago
  If I remember during a previous GPU shortage (crypto?), Nvidia (and/or TSMC?) basically knew the music would stop and didn't want to be caught with its pants down after making the significant investments necessary to increase production Not to mention that without enough competition, you can just raise prices, which, uh (gestures at Nvidia GPU price trends...)
  - XorNot 8mo ago
    Somewhat ironically the AI boom means Nvidia would've easily made their money back on that investment though and probably even more thoroughly owned the GPGPU space. But as it is it's not like they made any bad decisions either.
  - alexpotato 8mo ago
    Similar thing happened with mask manufacturers during COVID. They didn't spin up additional mask production b/c they knew the pandemic would eventually pass. They learned this lesson from SARS. Not maxing out production during spikes (or seasonality) in demand is a key tenet of being a "rational economic actor".
    - skeeter2020 8mo ago
      too bad the bicycle industry didn't learn this. They acted like COVID was the new-normal, and it has resulted in many companies disappearing when they learned the hard way that demand for bikes in a pandemic is neither sutainable nor normal.
  - robinwhg 8mo ago
    I believe the TSMC CEO said that in a recent interview. They're aware that their now biggest customer Nvidia has a less broad product portfolio than Apple and the high volumes they buy propably won't last. It's too much of a risk to plan more Fabs based on that.
    - runjake 8mo ago
      They are indeed planning for more fabs, in order to meet volumes. Last week: “TSMC's board approves $45 billion spending package on new fabs” https://www.tomshardware.com/tech-industry/semiconductors/tsmcs-board-approves-usd45-billion-spending-package-on-new-fabs-record-sign-off-signals-aggressive-expansion-to-grow-capacity https://www.tomshardware.com/tech-industry/semiconductors/ts...
      - aurareturn 8mo ago
        Silicon Valley is arguing that TSMC isn't investing enough. They should be investing hundreds of billions to build fabs, like how big tech is investing in the AI buildout. $45 billion for new fabs is peanuts compared to Amazon's $200b and Google's $180b investment in 2026. Can't really blame TSMC though. It takes years for fabs to go from plan to first wafer. By the time new fabs go online, demand might not be there. Who knows?
        rwmj 8mo ago
        "Silicon Valley" doesn't get to make the decision unless they are willing to send some of those hundreds of billions to TSMC up front. (TSMC isn't going to want future promises of business either since those are worth very little.)
        aurareturn 8mo ago
        I don't disagree. I wrote the top comment here basically saying the same thing: https://news.ycombinator.com/item?id=46764223 https://news.ycombinator.com/item?id=46764223 If big tech prepays for the entire fab, I think TSMC would do it.
- kshacker 8mo ago
  Are these factories already running 24/7 that labor can't be added to make more without adding capital infra? And if they were running 24/7, maybe setting up another factory or line will avoid some of the 24/7 scheduling.
  - SietrixDev 8mo ago
    As far as I know, the lithography machines are indeed running 24/7 (barring servicing). https://www.asml.com/en/products/customer-support https://www.asml.com/en/products/customer-support
- aurareturn 8mo ago
  I'll add that the GPU, CPU, storage, and RAM industries crashed in 2022 after a Covid-induced boom.[0] Everything was cheap. Samsung sold SSDs at a loss that year. TSMC and other suppliers did not invest as much in cap ex in 2022 and 2023 because of the crash. Parts of the shortage today can be blamed by those years. Of course ChatGPT also launched in late 2022 and the rest is history. [0]www.trendforce.com/presscenter/news/20221123-11467.html
  - 1vuio0pswjnm7 8mo ago
    https://www.trendforce.com/presscenter/news/20221123-11467.html https://www.trendforce.com/presscenter/news/20221123-11467.h...
  - slashdev 8mo ago
    I bet the same thing happens when the AI bubble pops. "but this time is different, it's not a bubble, there's real value there" Economists use the term “bubble” to describe an asset price that has risen above the level justified by economic fundamentals, as measured by the discounted stream of expected future cash flows that will accrue to the owner of the asset. I think there's little argument that is happening, the question is more about to what extent is it a bubble. The entire global software industry is worth less than $1 trillion dollars. Or in other words smaller than the current valuation of just OpenAI + Anthropic. Planned capital investment this year by the Magnificent 7 alone is $600B. More than 2/3 of the total global software industry. In one year. Good luck buying any computer hardware this year, there will be a shortage of everything, including electricity. It's a bubble. But when does the music stop?
    - spwa4 8mo ago
      If it's a bubble that big it's 1) the only reason any part of the economy is growing at all 2) the only reason US banks aren't bankrupt due to the commercial real estate debacle they got themselves into In other words, if this is a bubble, if this pops, we're back in the 2008 situation. Where banks will go bankrupt one after the other like dominoes (in the sense that this amount is large enough that large banks will fail their financial obligations). And you can argue as much as you want based on "real" valuation metrics but none of your investments, not even cash dollars or even gold, will come out of that one intact. Fortunately, there's the counterargument: you know what else is higher than ever? The revenue produced by the software industry. To the point that at the moment you can say, as crazy as it sounds: if revenue of the big software firms keeps growing the way it IS currently growing, this is not enough investment. In case you're wondering what exactly that means, not enough investment. Think of it like this: you're selling shoes. If you invest too little in new shoes (or whatever resources you need to sell shoes), then you will have to tell customers coming in "sorry, all out of shoes, take your money elsewhere". Currently it's not enough investment. If this growth rate keeps up for 1.5 years, Amazon will have to close the store to anyone who wants more machines, in fact they are turning away large customers right now at Amazon, Google and Microsoft. That's where the "spend more now" madness is coming from. Is it unjustified? Well, it appears not.
- philjackson 8mo ago
  > it takes time to spin up a hard drive factory Very good.
- aftbit 8mo ago
  You're talking about how higher prices can motivate higher supply. The parent commenter was talking about how higher prices shift the current point on the demand curve to the right. If hard drives sold for $1 billion per gigabyte, we wouldn't see even AI companies buying as many as they are, and current production would go idle. Even assuming supply is locally inelastic (as it is given no time or space to scale, or given a lack of confidence that scaling is wise), you should be able to find a price point that avoids supply shortages by manipulating demand. Thus far, we've not found that point.
- squidbeak 8mo ago
  The problem with this expectation of usual market behavior is that demand from AI will still be unsatisfied even after buying out the current providers' whole supply, so any new manufacturer entering the market will also prioritize high-paying AI companies above consumers.
  - m4rtink 8mo ago
    Sure - the question is how long they can remain high-paying. Looks like all the money reserves big companies have been sitting on are gone. Circular money deals are in full swing & now it looks like some companies are now looking for loans. Not sure how much longer this can go on until it comes crashing down.
Xunjin 8mo ago
Loved the reference. Probably from Margin Call[0] 0. https://youtu.be/fij_ixfjiZE https://youtu.be/fij_ixfjiZE
- mcny 8mo ago
  I like to imagine the reference in the movie margin call is that of a merry go round or a game of Musical chair. Like we are all on a ride, none of us are the operator, and all we can do is guess when the music will stop (and the ride ends). The problem with this AI stuff is we don't know how much we will be willing to pay for it, as individuals, as businesses, as nations. I guess we just don't know how far this stuff will be useful. The reasons for the high valuation is, in my guess, that there is more value here than what we have tapped so far, right? The revenues that nVidia has reported is based on what we hope we will achieve in the future so I guess the whole thing is speculation?
  - Xunjin 8mo ago
    TBF, all financial market is speculation these days, what only change is the figure/percentage of how much a share is actually the value it's priced. > The problem with this AI stuff is we don't know how much we will be willing to pay for it, as individuals, as businesses, as nations. I guess we just don't know how far this stuff will be useful. The reasons for the high valuation is, in my guess, that there is more value here than what we have tapped so far, right? I think the value now comes on how we make a product of it, for example, like OpenClaw. Whether we like or not, AI is really expensive to train, not only in monetary value but also in resources, and the gains have been diminishing with each “generation”. Let's not forget we heard promises that have not been fulfilled, for example AGI or “AI could potentially cure cancer, with enough power”.
    - pixl97 8mo ago
      And if you've been watching Deepmind AI has been making advances in medical sciences at a pretty damned fast rate. So not fulfilled is a pretty weak statement. The pipeline in medical is very long. And that's not even talking about the head spinning rate robotics is advancing. The hardware we use for LLMs is also being used in robot simulation for hardware training that gives results in hours that took weeks or months in the past.
mrweasel 8mo ago
AI is going to be what fiber was to the dotcom bubble. Someone spend a lot of money on a lot of infrastructure, some of which is going to be incredibly useful, but sold for much less than it cost to build. Hardware just depreciates much much faster than fiber networks.
- baq 8mo ago
  current shortages are exactly the result of fabs not wanting to commit extra capex due to overbuild risk and inference demand seems to be growing 10x yoy; you've famously got 8 year old TPUs at google at 100% load.
- hmmmmmmmmmmmmmm 8mo ago
  This goes beyond profits. It will be important for national security.
- ido 8mo ago
  Hardware just depreciates much much faster than fiber The manfucaturing capacity expanded to meet the demand for new hardware doesn't (as much)
  - danaris 8mo ago
    But if the demand drops for six months, the manufacturers are going to scale back production. If it drops for a year, they're likely to start shedding capacity, one way or another. This is not an equivalent situation. The vast, vast majority of what's being produced for this bubble is going to be waste once it pops.
    - m4rtink 8mo ago
      I guess you could at least mine the boards from defunct AI companies for memory chips ? Latest videos from Gamers Nexus showed it is apparently not that hard to transfer memory chips from board to board. Then you can leach precious metals from the PCB itself.
deleted 8mo ago
[deleted]
zozbot234 8mo ago
It's hard to increase long-run production capacity for what seems to be clearly a short-term spike in datacenter buildout. Even if AI itself is not much of a bubble, at some point spending on new AI facilities has to subside.
ghywertelling 8mo ago
Earlier gamers got punished by crypto and now they are being punished by AI.
- high_na_euv 8mo ago
  So what? Why gamers must be the most important group?
  - decremental 8mo ago
    [dead]
  - Gud 8mo ago
    I’d rather prefer that the average Joe has a good entertainment system than our corporate overlords has a good surveillance system.
    - pixl97 8mo ago
      The growth curve of technology has always pointed at the world becoming tiny and non-private.
      - Gud 8mo ago
        Disagree. Mass surveillance by corporations can be outlawed. Just because something is possible, doesn’t mean it must be necessarily so. I travel a lot for work to different nations. The cultural differences are stark. In the UK for example, they love their CCTVs. In Switzerland, they’re only allowed where they are deemed necessary.
        pixl97 8mo ago
        I mean back in the cold war we started losing privacy to foreign governments. A parade of overhead satellites is capturing everything you do all the time. As much as we expound about the rule of law, might makes right if the population isn't vigilant. Simply put technology gives capability. In 1900 we didn't have the capability to monitor everything that everybody did all the time and keep those records their entire life. Now we have technology that can do just that. This has nothing to do with the law. Zip, zilch, nada. Switzerland is one dark day away from having all their behaviors recorded by businesses/governments. At the end of the day legality is a theoretical construct, and technological capability is reality.
infecto 8mo ago
No it’s not an easy fix. Manufacturers don’t have a good pulse on long term demand. The he capex to spin up a new manufacturing plant is significant. Especially with the recency of Covid where some folks did get caught with their pants down and over invested during the huge demand boom. I don’t quite follow the narrative like yours about nation states and investors. There is certainly an industrial bubble going on and lots of startups getting massive amounts of capital but I here is a strong signal that a good part of this demand is here to stay. This will be one of those scenarios where some companies will look brilliant and others foolish.
- londons_explore 8mo ago
  Smart manufacturers will sell 'hard drive futures'. Ie. "Give us $100/drive now for 100k drives for delivery in march 2028". These contracts are then transferrable. The manufacturer can start work on a factory knowing they'll get paid to produce the drives. If the AI boom comes to an end, the manufacturer is still going to get paid for their factory, and if the AI company wants to recoup costs they could try to sell those contracts back to the manufacturer for pennies on the dollar, who might then decide (if it is more profitable) to halt work on the factory - and either way they make money.
  - bluGill 8mo ago
    That only works out if there are enough investors willing to pay for those futures. If the new factory can make a billion drives but they only have 2 of those futures contracts sold (that is 200k drives) they don't build the factory. Remember too if they sell those contacts they are on the hook to deliver - if it is just investors they will accept the street value of 100k drives in 2028 but some of the people might be buyers demanding physical goods. Every year a few farmers realize they are contracted to deliver more grain than they have in their bins and so have to buy some grain from someone else (often at a loss) just to deliver it. This isn't a common problem but it happens (most often the farmer is using their insurance payout to buy the grain - snip a very large essay on the complexities of this)
    - 8mo ago
pier25 8mo ago
I think AI companies are involving these other industries so when the money runs out they will claim the whole thing is too big too fail.
- junofan 8mo ago
  By buying flash and thus shifting demand to HDD? How does that work?
  - pier25 8mo ago
    The article doesn't mention flash or HDD. It seems that all storage by WD is already sold. My point is that directly or indirectly all hardware companies depend on memory and storage. If AI companies fall this could have repercussions to the whole industry.
aurareturn 8mo ago
There's clearly easy/irrational money distorting the markets here. No, I think it is real demand. AI will cause shortages in everything from GPUs to CPUs, RAM, storage, networking, fiber, etc because of real demand. The physical world can't keep up with AI progress. Hence, shortages. AI simply increases computer use by magnitudes. Now you can suddenly use Seedance 2.0 to make CGI that would have cost tens of millions 5 years ago for $5.[0] Everyone is going to need more disk space to store all those video files. Someone in their basement can make a full length movie limited only by imagination. The output quality keeps getting better quicker. AI agents also drastically increase storage demands. Imagine financial companies using AI agents to search, scrape, organize data on stocks that they wouldn't have been able to do prior. Suddenly, disk storage and CPUs are in high demand for tasks like these. I think the demand for computer hardware and networking gear is real and is only the beginning. As someone who is into AI, hardware, and investing, I've been investing in physical businesses based on the above hypothesis. The only durable moats will be compute, energy, and data. [0]https://seed.bytedance.com/en/seedance2_0 https://seed.bytedance.com/en/seedance2_0
- azan_ 8mo ago
  I wonder if I'm alone in being optimistic about this. I believe that the gigantic inflow of money into hardware will lead to large increase in production capabilities, accelerated progress and perhaps even new, better architectures.
  - zozbot234 8mo ago
    I actually agree: a spike in prices due to bumping against capacity limits is way better than a downturn in the market. But this is only really true if AI hyperscalers are incented to space out their big buildouts over time (while raising their prices enough to ration current demand) so that suppliers can have some guarantee that their expanded capacity will be used.
- anthk 8mo ago
  AI's output is not reproducible. It's a disaster.
xpe 8mo ago
> Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay. This sounds like economic dogma based on pointing at some future equilibrium. I like the saying that goes something like "life is what is happens when you are waiting for the future". In the same way, it seems to me that equilibrium is increasingly less common for many of us. Markets are dynamic systems, and there are sub-fields of economics that recognize this. The message doesn't always get out unfortunately. > But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies. This feels like more dogma: find a convenient scape-goat: governments. Time to wake up to what history has shown us! Markets naturally reflect boom and bust cycles, irrationality of people, and various other market failures. None of these are news to competent economists, by the way. Be careful from whence you get your economic "analysis".
- pixl97 8mo ago
  Yes, this is why the prices of housing has dropped dramatically. The market stepped up and filled the demand needed and now everyone can afford a place to live .....
  - xpe 8mo ago
    I can't tell if the comment is above is sarcastic or serious: it could go either way.
    - pixl97 8mo ago
      This is 100% serious as it has not gone this way in the US. Housing prices keep going up in general and NIMBYism has stopped a massive amount of density growth.
  - torton 8mo ago
    The housing market is a textbook example of the opposite of a free market. In most markets, anything that does not "improve the character of the neighbourhood" is impossible to build by design.
bko 8mo ago
Higher price encourages more supply. Typically when you see a acute shortage, its quickly followed by a glut as supply starts coming online in an over correction.
- pixl97 8mo ago
  These factories take years to make and massive amounts of money. That and there are so few manufacturers now they are far more likely to collude
BoredPositron 8mo ago
The quote was from the screenwriter he never said it.
thisisit 8mo ago
This is what a business cycle looks like. Seeing the first mover succeed, every Tom, Dick and Harry wants to emulate. It distorts the price because people would pay premium for everything. Then there is surplus supply and no takers. People are caught with their pants down and things go for cheap. This repeats ad nauseum. Whether it was building ISPs during early 2000s or the abundance of streaming service where every media company wanted one. Just because the corporate overlord doesn't want to look foolish for not following a trend.
tasuki 8mo ago
> Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI. Cheap hard drives and ram, yay! Perhaps GPUs too!
- ASalazarMX 8mo ago
  You wish. More likely all that data center capacity will be used to sell something as nefarious, like VDI for the masses. You won't need RAM, disk and GPUs when you can rent those from OpenVDI.
xnx 8mo ago
> Normally this wouldn't be a problem: prices would go up, supply would eventually increase Sounds right > there's no price that is too high for these supplies. Are you saying even higher prices won't increase supply? I don't understand.
- zymhan 8mo ago
  A comment above yours clearly explains why: https://news.ycombinator.com/item?id=47034480 https://news.ycombinator.com/item?id=47034480

by glimshe 8mo ago

appreciatorBus 8mo ago

Regardless where demand comes from, it takes time to spin up a hard drive factory, and prices would have to rise enough that, as a producer, you would feel confident that a new hard drive factory will actually pay off. Conversely, if you feel that boom is irrational and temporary, as a producer you’d be quite wary of investing money in a new factory if there was a risk it would be producing into a glut in a few years.

anonymars 8mo ago
If I remember during a previous GPU shortage (crypto?), Nvidia (and/or TSMC?) basically knew the music would stop and didn't want to be caught with its pants down after making the significant investments necessary to increase production Not to mention that without enough competition, you can just raise prices, which, uh (gestures at Nvidia GPU price trends...)
- XorNot 8mo ago
  Somewhat ironically the AI boom means Nvidia would've easily made their money back on that investment though and probably even more thoroughly owned the GPGPU space. But as it is it's not like they made any bad decisions either.
- alexpotato 8mo ago
  Similar thing happened with mask manufacturers during COVID. They didn't spin up additional mask production b/c they knew the pandemic would eventually pass. They learned this lesson from SARS. Not maxing out production during spikes (or seasonality) in demand is a key tenet of being a "rational economic actor".
  - skeeter2020 8mo ago
    too bad the bicycle industry didn't learn this. They acted like COVID was the new-normal, and it has resulted in many companies disappearing when they learned the hard way that demand for bikes in a pandemic is neither sutainable nor normal.
- robinwhg 8mo ago
  I believe the TSMC CEO said that in a recent interview. They're aware that their now biggest customer Nvidia has a less broad product portfolio than Apple and the high volumes they buy propably won't last. It's too much of a risk to plan more Fabs based on that.
  - runjake 8mo ago
    They are indeed planning for more fabs, in order to meet volumes. Last week: “TSMC's board approves $45 billion spending package on new fabs” https://www.tomshardware.com/tech-industry/semiconductors/tsmcs-board-approves-usd45-billion-spending-package-on-new-fabs-record-sign-off-signals-aggressive-expansion-to-grow-capacity https://www.tomshardware.com/tech-industry/semiconductors/ts...
    - aurareturn 8mo ago
      Silicon Valley is arguing that TSMC isn't investing enough. They should be investing hundreds of billions to build fabs, like how big tech is investing in the AI buildout. $45 billion for new fabs is peanuts compared to Amazon's $200b and Google's $180b investment in 2026. Can't really blame TSMC though. It takes years for fabs to go from plan to first wafer. By the time new fabs go online, demand might not be there. Who knows?
      - rwmj 8mo ago
        "Silicon Valley" doesn't get to make the decision unless they are willing to send some of those hundreds of billions to TSMC up front. (TSMC isn't going to want future promises of business either since those are worth very little.)
        aurareturn 8mo ago
        I don't disagree. I wrote the top comment here basically saying the same thing: https://news.ycombinator.com/item?id=46764223 https://news.ycombinator.com/item?id=46764223 If big tech prepays for the entire fab, I think TSMC would do it.
kshacker 8mo ago
Are these factories already running 24/7 that labor can't be added to make more without adding capital infra? And if they were running 24/7, maybe setting up another factory or line will avoid some of the 24/7 scheduling.
- SietrixDev 8mo ago
  As far as I know, the lithography machines are indeed running 24/7 (barring servicing). https://www.asml.com/en/products/customer-support https://www.asml.com/en/products/customer-support
aurareturn 8mo ago
I'll add that the GPU, CPU, storage, and RAM industries crashed in 2022 after a Covid-induced boom.[0] Everything was cheap. Samsung sold SSDs at a loss that year. TSMC and other suppliers did not invest as much in cap ex in 2022 and 2023 because of the crash. Parts of the shortage today can be blamed by those years. Of course ChatGPT also launched in late 2022 and the rest is history. [0]www.trendforce.com/presscenter/news/20221123-11467.html
- 1vuio0pswjnm7 8mo ago
  https://www.trendforce.com/presscenter/news/20221123-11467.html https://www.trendforce.com/presscenter/news/20221123-11467.h...
- slashdev 8mo ago
  I bet the same thing happens when the AI bubble pops. "but this time is different, it's not a bubble, there's real value there" Economists use the term “bubble” to describe an asset price that has risen above the level justified by economic fundamentals, as measured by the discounted stream of expected future cash flows that will accrue to the owner of the asset. I think there's little argument that is happening, the question is more about to what extent is it a bubble. The entire global software industry is worth less than $1 trillion dollars. Or in other words smaller than the current valuation of just OpenAI + Anthropic. Planned capital investment this year by the Magnificent 7 alone is $600B. More than 2/3 of the total global software industry. In one year. Good luck buying any computer hardware this year, there will be a shortage of everything, including electricity. It's a bubble. But when does the music stop?
  - spwa4 8mo ago
    If it's a bubble that big it's 1) the only reason any part of the economy is growing at all 2) the only reason US banks aren't bankrupt due to the commercial real estate debacle they got themselves into In other words, if this is a bubble, if this pops, we're back in the 2008 situation. Where banks will go bankrupt one after the other like dominoes (in the sense that this amount is large enough that large banks will fail their financial obligations). And you can argue as much as you want based on "real" valuation metrics but none of your investments, not even cash dollars or even gold, will come out of that one intact. Fortunately, there's the counterargument: you know what else is higher than ever? The revenue produced by the software industry. To the point that at the moment you can say, as crazy as it sounds: if revenue of the big software firms keeps growing the way it IS currently growing, this is not enough investment. In case you're wondering what exactly that means, not enough investment. Think of it like this: you're selling shoes. If you invest too little in new shoes (or whatever resources you need to sell shoes), then you will have to tell customers coming in "sorry, all out of shoes, take your money elsewhere". Currently it's not enough investment. If this growth rate keeps up for 1.5 years, Amazon will have to close the store to anyone who wants more machines, in fact they are turning away large customers right now at Amazon, Google and Microsoft. That's where the "spend more now" madness is coming from. Is it unjustified? Well, it appears not.
philjackson 8mo ago
> it takes time to spin up a hard drive factory Very good.
aftbit 8mo ago
You're talking about how higher prices can motivate higher supply. The parent commenter was talking about how higher prices shift the current point on the demand curve to the right. If hard drives sold for $1 billion per gigabyte, we wouldn't see even AI companies buying as many as they are, and current production would go idle. Even assuming supply is locally inelastic (as it is given no time or space to scale, or given a lack of confidence that scaling is wise), you should be able to find a price point that avoids supply shortages by manipulating demand. Thus far, we've not found that point.
squidbeak 8mo ago
The problem with this expectation of usual market behavior is that demand from AI will still be unsatisfied even after buying out the current providers' whole supply, so any new manufacturer entering the market will also prioritize high-paying AI companies above consumers.
- m4rtink 8mo ago
  Sure - the question is how long they can remain high-paying. Looks like all the money reserves big companies have been sitting on are gone. Circular money deals are in full swing & now it looks like some companies are now looking for loans. Not sure how much longer this can go on until it comes crashing down.

Xunjin 8mo ago

Loved the reference. Probably from Margin Call[0] 0. https://youtu.be/fij_ixfjiZE https://youtu.be/fij_ixfjiZE

mcny 8mo ago
I like to imagine the reference in the movie margin call is that of a merry go round or a game of Musical chair. Like we are all on a ride, none of us are the operator, and all we can do is guess when the music will stop (and the ride ends). The problem with this AI stuff is we don't know how much we will be willing to pay for it, as individuals, as businesses, as nations. I guess we just don't know how far this stuff will be useful. The reasons for the high valuation is, in my guess, that there is more value here than what we have tapped so far, right? The revenues that nVidia has reported is based on what we hope we will achieve in the future so I guess the whole thing is speculation?
- Xunjin 8mo ago
  TBF, all financial market is speculation these days, what only change is the figure/percentage of how much a share is actually the value it's priced. > The problem with this AI stuff is we don't know how much we will be willing to pay for it, as individuals, as businesses, as nations. I guess we just don't know how far this stuff will be useful. The reasons for the high valuation is, in my guess, that there is more value here than what we have tapped so far, right? I think the value now comes on how we make a product of it, for example, like OpenClaw. Whether we like or not, AI is really expensive to train, not only in monetary value but also in resources, and the gains have been diminishing with each “generation”. Let's not forget we heard promises that have not been fulfilled, for example AGI or “AI could potentially cure cancer, with enough power”.
  - pixl97 8mo ago
    And if you've been watching Deepmind AI has been making advances in medical sciences at a pretty damned fast rate. So not fulfilled is a pretty weak statement. The pipeline in medical is very long. And that's not even talking about the head spinning rate robotics is advancing. The hardware we use for LLMs is also being used in robot simulation for hardware training that gives results in hours that took weeks or months in the past.

mrweasel 8mo ago

AI is going to be what fiber was to the dotcom bubble. Someone spend a lot of money on a lot of infrastructure, some of which is going to be incredibly useful, but sold for much less than it cost to build. Hardware just depreciates much much faster than fiber networks.

baq 8mo ago
current shortages are exactly the result of fabs not wanting to commit extra capex due to overbuild risk and inference demand seems to be growing 10x yoy; you've famously got 8 year old TPUs at google at 100% load.
hmmmmmmmmmmmmmm 8mo ago
This goes beyond profits. It will be important for national security.
ido 8mo ago
Hardware just depreciates much much faster than fiber The manfucaturing capacity expanded to meet the demand for new hardware doesn't (as much)
- danaris 8mo ago
  But if the demand drops for six months, the manufacturers are going to scale back production. If it drops for a year, they're likely to start shedding capacity, one way or another. This is not an equivalent situation. The vast, vast majority of what's being produced for this bubble is going to be waste once it pops.
  - m4rtink 8mo ago
    I guess you could at least mine the boards from defunct AI companies for memory chips ? Latest videos from Gamers Nexus showed it is apparently not that hard to transfer memory chips from board to board. Then you can leach precious metals from the PCB itself.

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zozbot234 8mo ago

It's hard to increase long-run production capacity for what seems to be clearly a short-term spike in datacenter buildout. Even if AI itself is not much of a bubble, at some point spending on new AI facilities has to subside.

ghywertelling 8mo ago

Earlier gamers got punished by crypto and now they are being punished by AI.

high_na_euv 8mo ago
So what? Why gamers must be the most important group?
- decremental 8mo ago
  [dead]
- Gud 8mo ago
  I’d rather prefer that the average Joe has a good entertainment system than our corporate overlords has a good surveillance system.
  - pixl97 8mo ago
    The growth curve of technology has always pointed at the world becoming tiny and non-private.
    - Gud 8mo ago
      Disagree. Mass surveillance by corporations can be outlawed. Just because something is possible, doesn’t mean it must be necessarily so. I travel a lot for work to different nations. The cultural differences are stark. In the UK for example, they love their CCTVs. In Switzerland, they’re only allowed where they are deemed necessary.
      - pixl97 8mo ago
        I mean back in the cold war we started losing privacy to foreign governments. A parade of overhead satellites is capturing everything you do all the time. As much as we expound about the rule of law, might makes right if the population isn't vigilant. Simply put technology gives capability. In 1900 we didn't have the capability to monitor everything that everybody did all the time and keep those records their entire life. Now we have technology that can do just that. This has nothing to do with the law. Zip, zilch, nada. Switzerland is one dark day away from having all their behaviors recorded by businesses/governments. At the end of the day legality is a theoretical construct, and technological capability is reality.

infecto 8mo ago

No it’s not an easy fix. Manufacturers don’t have a good pulse on long term demand. The he capex to spin up a new manufacturing plant is significant. Especially with the recency of Covid where some folks did get caught with their pants down and over invested during the huge demand boom. I don’t quite follow the narrative like yours about nation states and investors. There is certainly an industrial bubble going on and lots of startups getting massive amounts of capital but I here is a strong signal that a good part of this demand is here to stay. This will be one of those scenarios where some companies will look brilliant and others foolish.

londons_explore 8mo ago
Smart manufacturers will sell 'hard drive futures'. Ie. "Give us $100/drive now for 100k drives for delivery in march 2028". These contracts are then transferrable. The manufacturer can start work on a factory knowing they'll get paid to produce the drives. If the AI boom comes to an end, the manufacturer is still going to get paid for their factory, and if the AI company wants to recoup costs they could try to sell those contracts back to the manufacturer for pennies on the dollar, who might then decide (if it is more profitable) to halt work on the factory - and either way they make money.
- bluGill 8mo ago
  That only works out if there are enough investors willing to pay for those futures. If the new factory can make a billion drives but they only have 2 of those futures contracts sold (that is 200k drives) they don't build the factory. Remember too if they sell those contacts they are on the hook to deliver - if it is just investors they will accept the street value of 100k drives in 2028 but some of the people might be buyers demanding physical goods. Every year a few farmers realize they are contracted to deliver more grain than they have in their bins and so have to buy some grain from someone else (often at a loss) just to deliver it. This isn't a common problem but it happens (most often the farmer is using their insurance payout to buy the grain - snip a very large essay on the complexities of this)
  - 8mo ago

pier25 8mo ago

I think AI companies are involving these other industries so when the money runs out they will claim the whole thing is too big too fail.

junofan 8mo ago
By buying flash and thus shifting demand to HDD? How does that work?
- pier25 8mo ago
  The article doesn't mention flash or HDD. It seems that all storage by WD is already sold. My point is that directly or indirectly all hardware companies depend on memory and storage. If AI companies fall this could have repercussions to the whole industry.

aurareturn 8mo ago

There's clearly easy/irrational money distorting the markets here. No, I think it is real demand. AI will cause shortages in everything from GPUs to CPUs, RAM, storage, networking, fiber, etc because of real demand. The physical world can't keep up with AI progress. Hence, shortages. AI simply increases computer use by magnitudes. Now you can suddenly use Seedance 2.0 to make CGI that would have cost tens of millions 5 years ago for $5.[0] Everyone is going to need more disk space to store all those video files. Someone in their basement can make a full length movie limited only by imagination. The output quality keeps getting better quicker. AI agents also drastically increase storage demands. Imagine financial companies using AI agents to search, scrape, organize data on stocks that they wouldn't have been able to do prior. Suddenly, disk storage and CPUs are in high demand for tasks like these. I think the demand for computer hardware and networking gear is real and is only the beginning. As someone who is into AI, hardware, and investing, I've been investing in physical businesses based on the above hypothesis. The only durable moats will be compute, energy, and data. [0]https://seed.bytedance.com/en/seedance2_0 https://seed.bytedance.com/en/seedance2_0

azan_ 8mo ago
I wonder if I'm alone in being optimistic about this. I believe that the gigantic inflow of money into hardware will lead to large increase in production capabilities, accelerated progress and perhaps even new, better architectures.
- zozbot234 8mo ago
  I actually agree: a spike in prices due to bumping against capacity limits is way better than a downturn in the market. But this is only really true if AI hyperscalers are incented to space out their big buildouts over time (while raising their prices enough to ration current demand) so that suppliers can have some guarantee that their expanded capacity will be used.
anthk 8mo ago
AI's output is not reproducible. It's a disaster.

xpe 8mo ago

> Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay. This sounds like economic dogma based on pointing at some future equilibrium. I like the saying that goes something like "life is what is happens when you are waiting for the future". In the same way, it seems to me that equilibrium is increasingly less common for many of us. Markets are dynamic systems, and there are sub-fields of economics that recognize this. The message doesn't always get out unfortunately. > But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies. This feels like more dogma: find a convenient scape-goat: governments. Time to wake up to what history has shown us! Markets naturally reflect boom and bust cycles, irrationality of people, and various other market failures. None of these are news to competent economists, by the way. Be careful from whence you get your economic "analysis".

pixl97 8mo ago
Yes, this is why the prices of housing has dropped dramatically. The market stepped up and filled the demand needed and now everyone can afford a place to live .....
- xpe 8mo ago
  I can't tell if the comment is above is sarcastic or serious: it could go either way.
  - pixl97 8mo ago
    This is 100% serious as it has not gone this way in the US. Housing prices keep going up in general and NIMBYism has stopped a massive amount of density growth.
- torton 8mo ago
  The housing market is a textbook example of the opposite of a free market. In most markets, anything that does not "improve the character of the neighbourhood" is impossible to build by design.

bko 8mo ago

Higher price encourages more supply. Typically when you see a acute shortage, its quickly followed by a glut as supply starts coming online in an over correction.

pixl97 8mo ago
These factories take years to make and massive amounts of money. That and there are so few manufacturers now they are far more likely to collude

BoredPositron 8mo ago

The quote was from the screenwriter he never said it.

thisisit 8mo ago

This is what a business cycle looks like. Seeing the first mover succeed, every Tom, Dick and Harry wants to emulate. It distorts the price because people would pay premium for everything. Then there is surplus supply and no takers. People are caught with their pants down and things go for cheap. This repeats ad nauseum. Whether it was building ISPs during early 2000s or the abundance of streaming service where every media company wanted one. Just because the corporate overlord doesn't want to look foolish for not following a trend.

tasuki 8mo ago

> Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI. Cheap hard drives and ram, yay! Perhaps GPUs too!

ASalazarMX 8mo ago
You wish. More likely all that data center capacity will be used to sell something as nefarious, like VDI for the masses. You won't need RAM, disk and GPUs when you can rent those from OpenVDI.

xnx 8mo ago

> Normally this wouldn't be a problem: prices would go up, supply would eventually increase Sounds right > there's no price that is too high for these supplies. Are you saying even higher prices won't increase supply? I don't understand.

zymhan 8mo ago
A comment above yours clearly explains why: https://news.ycombinator.com/item?id=47034480 https://news.ycombinator.com/item?id=47034480