[bhaney]

It actually is true. You're also right that physics would eventually constrain die size, but it isn't the bottleneck that's keeping CPUs at their typical current size. This should be pretty obvious from the existence of (rare and expensive) specialty CPU dies that are much larger than typical ones. They're clearly not physically impossible to produce, just very expensive. The current bottleneck holding back die sizes is in fact costs, since larger die sizes cause the inevitable blemishes to ruin larger chunks of your silicon wafer each, cratering yields.

> added levels of muxing necessarily mean that there's a limit to how low the latency of a cache can be

L1 cache avoids muxing as much as possible, which is why it takes up so much die space in the first place.

[Tuna-Fish]

The path of loading data from L1 is one of the tightest, most timing-critical parts of a modern CPU. Every cycle of latency here has very clear, measurable impact on performance, and modern designs typically have 4-5 cycle L1 load-to-use. Current AMD cores do really well against Intel ones despite clocking lower and being weaker on most types of resources simply because they have a 1 cycle advantage. If you had literally infinite cheap transistors available, it would not be a good idea to spend them on the L1 cache, because this would make the cpu slower.

> L1 cache avoids muxing as much as possible, which is why it takes up so much die space in the first place.

Every time you double the size of a cache, you need to add a single extra mux on the access path. Simply to be able to select from which half of the cache you want the result. You also increase the distance that a signal needs to propagate, but I believe for L1 the muxes dominate.