I find it very telling that both Samsung and SK Hynix already stated that they don't plan to expand capacity - officially to prevent overcapacity in the future. It would also be plausable that both doubt OpenAI will follow through with the contract.
Expanding manufacturing capacity takes many years. Memory has historically been a cyclical business with boom and bust periods. It’s reasonable for manufacturers to be cautious about deciding to expand.
If the demand holds I’m sure they’ll expand. Until then, I think they see it as a short term supply spike.
They don't need to expand capacity to fulfill this contract.
They would want to expand capacity if they believed this increase in demand is long lasting - the implication is therefore that they don't believe it, or not enough to risk major capital expenditures.
You saw the same with GPU makers not wanting to expand capacity during the Cryptocurrency boom. They don't want to be left holding the bag when the bubble pops.
Part of that equation, FWIW, is that certain countries would flood the market with supply to make any new projects suddenly unprofitable.
Which sucks extra bad because if you shut the project down but start it back up you can't just flip a switch. Gotta put together a whole new team and possibly retrain them.
I sincerely hope that OpenAI goes down in flames with those DRAM contracts are going to the highest bidder then so probably Google or whatever AI competitor.
Honestly having problems remembering the other AI companies without googling it. I recall MS, Facebook, Amazon, Google, and Anthropic.
When OpenAI fails, all the AI projects everywhere else will also be killed. Such is the nature of bubbles. With any luck the farm land where the datacenters were built will be sold back to the farmers for half off and they get a free barn out of the deal.
It's more likely that overcapacity is put to work in a plan B, like cheap cloud virtual desktops. Why spend effort on spying and tracking users when their whole desktop computer is in your data center?
I love the randomness of this question, at least in my context.
Las time I bought something at Sears was the spring of 2008; a new set of tires for my car, and they were bad so I never went back. Also, there aren't a lot of Sears in Mexico.
When the AI bubble pops, it's going to take the good parts of AI out with it.
Capitalism has never been about the survival of the fittest. That's just weird Nietzschean-Libertarian fantasy where someone ends up blaming the lack of truly free markets for their inability to get a date.
Any large building in a rural area will be used as a barn if it has no other useful purpose. It's kind of hilarious when I pass by the old AT&T long lines facility being used as a hay barn.
I refuse to read the AI slop that passes for journalism about the contracts OpenAI bought, but if they take physical delivery and open actual datacenters built with the RAM they'll be parted out at the minimum, if not absorbed by another AI provider or Big Tech in general.
> prevent overcapacity" is just a fancy way of saying "we prefer to gouge consumers at little risk to us."
No it’s not. Memory business has been cyclical for years. Over expansion is a real risk because new manufacturing capacity is very expensive and takes a long time to come online.
If they could make new manufacturing come online quickly they would do it and capture the additional profit of more sales.
If you present an operating profit of €25 billion USD, yes, in a healthy true market competition would force you to either A) eat into your profit margin by reducing prices or B) invest in R&D and capacit-
Actually, let me eat my words, you are right. As I typed this I saw some news from an hour ago[0] about SK Hynix planning to invest about $500 billion into 4 more fabs. I imagine [hope] Samsung will follow, and together with Chinese memory fabs ramping up both in capacity and technology, prices will return to earth in 2027, maybe 2028.
Guess I am just a little too bitter because GPU prices finally seemed to normalize after half a decade of craziness. Topped with corporations in the West usually forgoing investment and using profits like these to do massive stock buybacks and dividends, souring my expectations.
Additional profit? They're making a lot more money right now than if they had more supply.
The risk of overexpansion is real but I really doubt they want to expand much in the next couple years. They don't have to worry about being undercut by small competitors so they can enjoy the moment.
No they are making higher margins, but not getting as much profit as they could have.
Look at the standard Econ 101 supply-demand curve.
If they could make and sell twice as many chips, it would not cut there margins anywhere near half. They would be making much more.
When demand spikes up and down there will be pain. Because booms are not predictable, in timing, size or duration. And accelerating supply expansion is very expensive, slow, and risky.
Many boom prompted RAM supply expansions have ended in years of unprofitable over capacity.
Now thinking of this from the other side, 2 big DRAM producers are taking the risk to dedicate a very big part of their production to AI and if we assume they also have similar deals with other AI companies or big datacenters, what is their risk profile if the AI bubble bursts? Are they viable as companies then ? What is their plan B ?
Their risks are none. They are not increasing capacity, only selling the available one to the highest bidder. Whenever these AI companies run out of money, these producers can simply resume their regular business.
It only depends on whether they get addicted to the high prices.. as long as they can withstand a collapse in the prices then you're right they have minimal risk
Not sure about DRAM companies, but many businesses would still go under if they sold their annual production to a company that then goes bankrupt and won't pay anything for the delivered goods.
Hopefully they get paid more than once a year. Their risk is completely dependent on 1. the net X days until they are paid, and 2. How fast they delay shipment when/if a payment is delayed.
> what is their risk profile if the AI bubble bursts?
Exactly. This is why they’re not scrambling to invest in additional capacity. If these memory manufacturers went all in on new capacity it would take years to build out. If the bubble bursts, or even if it doesn’t burst and just tapers off back to normal demand, they would be in a bad position with excess manufacturing capacity that isn’t paying off.
I think the price increases we are seeing are a direct result of the skepticism about AI scale viability. The big dram houses aren’t increasing capacity, due to the risks you mention.
So demand from other sources has to be suppressed through being priced out in order to meet those supply promises made to OAI in ignorance of their true scale.
This is OAI doing suppliers dirty by making economy distorting moves without transparency, intentionally distorting the market in an effort to hurt competitors.
Yet another example of the “free market” creating destruction for the general public.
As a thought experiment, replace “dram” with “rice” or another essential food stock. Market manipulation such as this is wildly irresponsible, anti-humanity and antithetical to public good. Wars are started over less.
This is an excellent example of the actual alignment of OpenAI as an organization. Yet we are to trust them with leading the way in the alignment of our manque oracles of truth and power?
> This is OAI doing suppliers dirty by making economy distorting moves without transparency, intentionally distorting the market in an effort to hurt competitors. Yet another example of the “free market” creating destruction for the general public.
At the speed OpenAI is growing, it's far more likely they're trying to protect themselves first, not harm competitors. The market only exists because it's free / semi free. Were it controlled by statist bureaucrats - which is the sole alternative back in reality - the situation would be drastically worse. Just ask Soviet Russia. You'd get your meager once every ten year DRAM ration and you'd like it.
The general public isn't the standard of morality or good. Invoking it is meaningless.
I think we can dispense with the strawman Soviet Russia alternative lmfao.
In a reasonably well regulated market, deception at that scale (that utterly destroys competitive buildouts by externalizing the costs that normally would be borne by a customer needing an exceptional order) would be a clear violation of market laws. The fact that deceptive, aggressively anticompetitive behavior such as this , blatantly harmful to other innovation passes as “free market” is a laughable assertion… this is merely the will of the stronger, not any reasonable definition of a free market. A free market implies transparency in pricing and demand, alongside fair competition practices.
Anyone else planning to innovate in the ML space just took a huge hit thanks to OAI, including scientists, pharmaceutical companies, and other things that arguably operate mostly in the realm of clear public good.
Their inherent assumption that might = right is a very powerful indication of their inability to be trusted in the control of a tool / weapon that has more potential to steer the future of humanity than nuclear power/weapons ever did. It’s clear that A: they don’t see AI as any big deal, or B: they don’t care how their actions affect humanity in any nuanced sense of the concept.
> The big dram houses aren’t increasing capacity, due to the risks you mention.
Except they are
> SK hynix to boost DRAM production by a huge 8x in 2026, still won't be enough for RAM shortages
> It's also not just SK hynix that is boosting DRAM production capacity, with both Samsung and Micron rapidly increasing their respective DRAM production numbers.
That's such an impossibly big number for that timeline. The actual news is they're ramping up their newest node, which they were doing anyway, and which was a small percent of their total production.
lol 8x in 2026 hahahahahahaha that is one of the funniest things I’ve ever heard of coming from a semiconductor manufacturer. Maybe 8x as many of something they weren’t selling beforehand, but increasing production on full fabs by 8x? I’d love to be wrong but this makes zero sense to me.
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.
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%
After GPU crypto mining became unprofitable Chinese manufacturers took "mining only" cards, desoldered the GPU and built new graphics cards using the chips.
So at least the lower end stuff (RTX6000) could be repurposed like that.