5 ms·

Or they'll just enjoy the high margins and not invest significantly more than they normally would in new production capacity.

by zardo 7mo ago

Ajedi32 7mo ago
And thereby leave a bunch of profits on the table while simultaneously losing market share to competitors who do invest in more capacity?
- littlestymaar 7mo ago
  Which competitor is going to invest in increasing their capacity when everyone expects the demand to decline sooner rather than later?
  - Ajedi32 7mo ago
    If demand declines then the shortage is still solved regardless. If it doesn't decline, than anyone who took that risk and increased their production capacity will benefit greatly, and those who didn't will lose market share.
    - zardo 7mo ago
      They're in business to make money not to solve the shortage. If they invest in new fabs and the bubble pops they're sitting on idle fabs.
      - Ajedi32 7mo ago
        And if they invest in new fabs and the bubble doesn't pop then they make a whole lot of that money they're in business to make. The incentives here are naturally very well aligned with solving the shortage. If doing nothing is likely to solve the shortage, then they'll do nothing. If increasing supply is likely to solve the shortage, then they'll increase supply. If there's a 50/50 chance of both, then some will increase supply and some will do nothing, and the market will reward whichever group was right and punish the other.
        littlestymaar 7mo ago
        You forgot to say “Amen” at the end of your gospel. I'm always baffled how seriously some people take that “market and incentives always lead to the greater good” religion despite plenty of empirical evidence against it. But hey, there are creationists out there too so it's not too surprising I guess.
        Ajedi32 7mo ago
        > “market and incentives always lead to the greater good” I never said anything of the sort, I'm just explaining basic economic facts. Feel free to pretend they aren't true if you wish, but if you do then for all our sakes please stay as far away from the levers of economic policy as possible.
        littlestymaar 7mo ago
        These aren't “basic economic facts”, these are basic pieces of economic liturgy, it's not grounded in any factual reality. It only works in microeconomics lalaland. In the real world, executives simply aren't being incentivized for all-or-nothing risk taking and the shareholders of public industrial companies don't want the executives to make gambles in an attempt to make a big payout, they want steady yields with limited risks. And the financial actors who would be ready to take this kind of “high risk high reward” bets aren't operating in these kinds of markets. Just look out of the window, semiconductor and electronics fabs aren't rushing to expand their capacity, they are very familiar with the issue of oversupply and are always very cautious before making capacity investment, because they know it could very well make them go under very quick should the market reverse. The more time passes, the more convinced I am that nothing did more damage to the broader public understanding of economic dynamics than the average Econ 101 class.
        Ajedi32 7mo ago
        The real world is indeed more complicated, but not in a way which renders the basic rules of economics untrue. What you're doing is the economic equivalent of pointing at an airplane and saying "Look at that! And you really still believe gravity exists?!? What an idiot!" I'm just pointing out some simple facts which tell us the plane will eventually come back down.
  - shadowpho 7mo ago
    China is coming online :(
    - GreenWatermelon 7mo ago
      Why the sad smily? I'm pretty happy Chinese tech is stepping up to break the current memory cartel.
hamdingers 7mo ago
Or they're not convinced that betting on continued hypergrowth of AI is a good idea.

Or they'll just enjoy the high margins and not invest significantly more than they normally would in new production capacity.

by zardo 7mo ago

Or they'll just enjoy the high margins and not invest significantly more than they normally would in new production capacity.

Ajedi32 7mo ago

And thereby leave a bunch of profits on the table while simultaneously losing market share to competitors who do invest in more capacity?

littlestymaar 7mo ago
Which competitor is going to invest in increasing their capacity when everyone expects the demand to decline sooner rather than later?
- Ajedi32 7mo ago
  If demand declines then the shortage is still solved regardless. If it doesn't decline, than anyone who took that risk and increased their production capacity will benefit greatly, and those who didn't will lose market share.
  - zardo 7mo ago
    They're in business to make money not to solve the shortage. If they invest in new fabs and the bubble pops they're sitting on idle fabs.
    - Ajedi32 7mo ago
      And if they invest in new fabs and the bubble doesn't pop then they make a whole lot of that money they're in business to make. The incentives here are naturally very well aligned with solving the shortage. If doing nothing is likely to solve the shortage, then they'll do nothing. If increasing supply is likely to solve the shortage, then they'll increase supply. If there's a 50/50 chance of both, then some will increase supply and some will do nothing, and the market will reward whichever group was right and punish the other.
      - littlestymaar 7mo ago
        You forgot to say “Amen” at the end of your gospel. I'm always baffled how seriously some people take that “market and incentives always lead to the greater good” religion despite plenty of empirical evidence against it. But hey, there are creationists out there too so it's not too surprising I guess.
        Ajedi32 7mo ago
        > “market and incentives always lead to the greater good” I never said anything of the sort, I'm just explaining basic economic facts. Feel free to pretend they aren't true if you wish, but if you do then for all our sakes please stay as far away from the levers of economic policy as possible.
        littlestymaar 7mo ago
        These aren't “basic economic facts”, these are basic pieces of economic liturgy, it's not grounded in any factual reality. It only works in microeconomics lalaland. In the real world, executives simply aren't being incentivized for all-or-nothing risk taking and the shareholders of public industrial companies don't want the executives to make gambles in an attempt to make a big payout, they want steady yields with limited risks. And the financial actors who would be ready to take this kind of “high risk high reward” bets aren't operating in these kinds of markets. Just look out of the window, semiconductor and electronics fabs aren't rushing to expand their capacity, they are very familiar with the issue of oversupply and are always very cautious before making capacity investment, because they know it could very well make them go under very quick should the market reverse. The more time passes, the more convinced I am that nothing did more damage to the broader public understanding of economic dynamics than the average Econ 101 class.
        Ajedi32 7mo ago
        The real world is indeed more complicated, but not in a way which renders the basic rules of economics untrue. What you're doing is the economic equivalent of pointing at an airplane and saying "Look at that! And you really still believe gravity exists?!? What an idiot!" I'm just pointing out some simple facts which tell us the plane will eventually come back down.
- shadowpho 7mo ago
  China is coming online :(
  - GreenWatermelon 7mo ago
    Why the sad smily? I'm pretty happy Chinese tech is stepping up to break the current memory cartel.

hamdingers 7mo ago

Or they're not convinced that betting on continued hypergrowth of AI is a good idea.