[hikarudo]

It's not a market failure, it's just supply and demand. There are many computer components competing for the same resources (fabs, wafers). Demand for GPUs, RAM etc. has increased a lot due to AI, but supply is still the same due to new fabs being huge investments that take years to build. Of course the price goes up.

[wtallis]

> There are many computer components competing for the same resources (fabs, wafers).

That's a bit off the mark. Processors, RAM, and flash memory each require their own specialized fabs. TSMC makes processors but not DRAM or NAND flash. Kioxia makes flash only. Samsung has all three types of fabs. Micron does DRAM and NAND, in different fabs.

The increase in SSD prices is not because there are many components competing for the same constrained resources, it's that they are complementary goods being subject to the same dynamics in parallel because the servers that are causing this demand spike need all of those components. Where we do see competition for the same fab capacity is in the mix of DRAM types, where GPUs want HBM, server CPUs want DDR5, laptops and phones (and the occasional server CPU) want LPDDR. And competition among different types of processors for TSMC's fab capacity.

[lgg]

I mostly agree, but if you go further back in the supply chain there are a number of common inputs/tools. For example, as 2025 the new LPDDR lines are using EUV systems, which means for new fab production both DRAM and logic producers are competing for machines from ASML.

It doesn't change your point that these lines are different and the immediate price spike is not about them competing for capacity in the same facilities, but the fact that manufacturers are committing to large enough future purchases to drive new fab construction means that future pricing outlook (which does impact the current prices to extent) does involve some amount of competition between different types of semiconductor products.

[spacebacon]

Shared skilled labor is another thing to consider.

[wtallis]

That's only going to change on similar timescales to the fab capacity, which is to say multiple years.

[hikarudo]

Thanks for the correction. You're absolutely right.

[state_less]

An industry doesn't need to increase supply when demand increases, they can absorb the demand as profits. More so in an industry that is hard to enter into. Consumers hate this and call it all sorts of things like market failure, gouging, etc... In this case, the suppliers are slow walking increases in production and enjoying a run up in profits. They raise concerns about oversupply, as if this deep learning thing were some passing fad and the market will have no use for the new supply if it passes. It's a dubious notion though, the demand is here to stay and new supply needs to come online to meet demand. We simply need more silicon in the market. High prices should eventually bring new supply online, but I'm a little disappointed by the rate of the ramp up.

[aftbit]

>It's a dubious notion though, the demand is here to stay and new supply needs to come online to meet demand.

This is a big bet. Look at what happened in 2001 with the dot-com boom. We're still trading on their dark fiber over-build today. Meanwhile any overcapacity built in fabs will quickly be made obsolete by newer and better fab technology (or at least, that's been the pattern for the past 30 years).

I think you're missing the fact that building new supply takes time and sustained commitment, and there's simply nobody in a good position to make that commitment without losing big if your thesis turns out to be wrong.

If the demand for new AI builds is eventually satisfied, or worse, craters overnight, then who will be left holding the bag? It sure won't be Google or Apple, or even NVIDIA - it will be TSMC and Samsung.

But as you mention, this is all temporary. Either you're right, and demand will remain sustained long enough for some of the providers to decide to take that risk, or demand will crater and prices will fall.

The fact that the S&P 500 is near record highs at the same time as consumer confidence is at a 70 year low is not encouraging for continued all steam ahead in my mind... but then it's easy to predict a general future recession, and much harder to predict it to the day.

[state_less]

The idea that we're still trading dark fiber from 2001 is an old narrative right? I guess it is still floating around. But, we're in a second big fiber build out for not only residential, but also to connect all these new data centers. Could there be some demand oscillation for silicon? Sure, but overall deep learning is not some passing fad even if someone gets too far out over their skis and over buys. So far Big Tech has increased spend 3 years in a row and next year they'll spend more than this year. Demand has evidently not let up for AI services, we still need more silicon.

I doubt consumers will regret these compute purchases in 3 years, my 3 year old GPU is still holding value, actually increased in value, and I use it more now than ever.

I did predict or expect that if oil went to $150 we'd be in recession territory, currently hovering below that level and folks are feeling the squeeze and aren't happy. Things could get worse or better, tough to tell, but I think silicon demand is more or less secular and will do relatively well in a variety of macro conditions.

[jandrewrogers]

The dark fiber from the dotcom era is approaching the end of its life expectancy. Contracts for leasing dark strands reflected that. Most of it likely still has useful life left that the owners will want to monetize but it might change how it is used.

[robocat]

> too far out over their skis

Bad metaphor. Not being forward enough is a common mistake. When learning, you may want to make yourself _feel_ like you're too far forward. We can commonly think we're too far forward when actually overall we're still too far back. Teaching it is very hard.

Although it is dependent on your style of skis (e.g. carving) and style of skiing (powder, racing, cruising).

For me, it is very rare that I go too far forward (I began with a leant back style and I haven't rectified that after many years of skiing). I try to prioritise fun over ability.

[aftbit]

This seems like it would be easy to structurally solve - big tech could make strategic partnerships with 5 to 10 year horizons with the very fabs in question. If they promised to spend a flat or growing $X on silicon (without easy contract cancellation) over the next decade, then the risk would be entirely on the tech companies and not on the fab companies. Of course, there's always bankruptcy to worry about, but that's less of a threat for Google and Apple than it is for OpenAI or NVIDIA.

The fact that we _haven't_ seen such deals be made, and that ~50% of new datacenter builds have been quietly cancelled[1], suggests to me that we're dealing with paper demand more than true sustained demand.

1: https://www.tomshardware.com/tech-industry/artificial-intell...

[jandrewrogers]

> the suppliers are slow walking increases in production and enjoying a run up in profits

The major companies have been trying to build >$100B of new production capacity in the US for years now. All of these manufacturing facilities have been significantly delayed by NIMBYs using the same "environmental and community concerns" advocacy slop that hinders almost all productive industry in the US.

Blaming the suppliers is a lazy take. They aren't responsible for degrowth activists being able to dictate what we are allowed to build.

[cm2187]

Also my understanding is that a lot of the suppliers remain skeptical / prudent about the long term demand from AI. Not their first boom/bust cycle.

[throwaway67743]

Or their continued collective inability to predict or manage supply and demand, it happens repeatedly and previous events were very minor in comparison... The other obvious reason is profiteering but pretty much impossible to prove.

[cm2187]

They are public companies, their bottom line isn't exactly secret. The only company that is really squeezing the market in term of prices is nvidia and they aren't the production bottleneck.

By the way, interesting podcast on that topic: https://www.youtube.com/watch?v=mDG_Hx3BSUE

[josephg]

> The other obvious reason is profiteering

When supply is constrained, widgets to get sold to whoever is willing to pay the most. It’s capitalism, baby. Arguably this is a good thing, because the limited resources are allocated to the people who can create the most value from them. And high prices provide an economic incentive to bring more supply online.

Nvidia is making big profits right now because they don’t have a lot of competition for their fancy AI chips. The prices will come down when they have more competition.

[throwaway67743]

That only works if the market is not controlled by basically 3 vendors and if the market isn't also pretty much impossible to break into. The value proposition is tenuous at best, the real value is being produced in other arenas, not this one.

[vondur]

We saw this during the pandemic when everyone wanted to purchase bicycles. Shimano (they make bike transmission parts and brakes) saw a huge increase in demand. Shimano didn't want to invest into new factories as they assumed the demand was a temporary spike. I'm pretty sure this is what is happening currently with RAM, SSD's and processors. New fabs are coming on line, and Apple is looking at both Intel and Samsung to bring additional capacity online. If the AI boom dramatically slows, it's going to be interesting to see how the industry responds.

[wredcoll]

I don't get this, is there a world where we need fewer cpu/ram/ssds in the future?

Like, there's so many things that could benefit from a cheap processor involved in their operation, the growth seems effectively unlimited.

[bravoetch]

There's definitely a world where we need newer products, but not as many or as fast in iteration. My gaming PC has 128GB of RAM... And I built it years ago when RAM was laughably cheap. I still never touch the sides on it.

[wredcoll]

Ok sure, assuning your gaming machine lasts 5-10 years, what about everyone else who is born (or turns 18 or whatever) during that timespan?

[cptskippy]

I think I'm agreeing with you but its also not something easily dismissed. The DRAM Cartel has been found to be distorting the market on numerous occasions by various regulatory bodies. There is a boom-bust cycle that occurs with DRAM and Flash memory. The Cartel claims they always lose despite the fact that demand seems to always steadily rise.

The pandemic caused once such boom-bust that resulted in a rather large downturn in demand in 2022-2023 referred to as the pandemic hangover. During that time demand dropped following overspend during the pandemic and members of the cartel drastically cut production at times to keep prices above cost. Even after the demand recovery began in 2023, the cartel members were slow to increase production and made little to no investment in production capacity in 2024-2025. Creating a shortage.

The AI hype cycle has exacerbated the shortage by creating speculative purchases and then panic buying. Remember the shoe company that pivoted to AI?

So Cartel market manipulation is partially to blame for the over 100% increase in prices and the shortages.

[mrtksn]

It is a market failure as the markets fail to cater for the demand due to structural factors. It’s basically designing database structure that causes huge latency due to use pattern changes and you are not able to alter the structure because that will demand even more painful downtime and latency and the pattern may eventually change and make the alterations redundant.

[throw0101c]

> It is a market failure as the markets fail to cater for the demand due to structural factors.

The Market™ is perhaps going after higher margins. If you can charge $200 instead of $100 for a widget, why wouldn't you?

Ideally at some point someone will see the margins and be motivated to go after some of it and offer things for $190, but the ROI on upfront fab costs given market risks may not be high enough for the business uncertainly that needs to be taken (boom-bust cycles).

No participant in The Market is obligated to "cater" to demand if they do not think the juice is worth the squeeze.

[mrtksn]

That’s why it’s market failure, not some specific company failure

[tw04]

It’s market consolidation unchecked. How many nand suppliers are there in the US? How many globally? Now add the sanctions on China, and tell us how that’s a competitive market.

The reality is all the things we learned from the Great Depression have been forgotten, and half the voting public seems to champion monopolies while simultaneously acting dumbfounded that the end result will always be an increase in costs.

[paulnpace]

The demand side is the world's "investors" buying up a product without producing profit. This results in locking out companies operating without such "investors" from accessing the product and using it to produce profit. This is a failure.

[bigbuppo]

And it's exacerbated by the companies that have to invest their own Real Money to produce factories to make the chips. Same goes with the power utilities. Everyone knows it's a bubble and they don't want to be the one left holding the hundred billion dollar bag like back when Enron went belly up.

[paulnpace]

But they create a new problem for themselves of converting consumers into non-brand loyalty pure price hunters. I don't think I'm speaking for myself when I say I will use the other guy if it saves me a penny for the rest of my life.

The counter-example I hold up is Harley-Davidson. They could hardly pay a bill in the late '70 through the '80s. They'd even get free samples from suppliers and put them into production. They survived with very strong brand loyalty from customers and after-market companies.

Samsung sells directly to customers of all sizes, so they have a very good idea as to where products end up. Cutting the legs off of innumerable small businesses is despicable behavior.

I don't care if Samsung is literally starving to death, where I was previously at least a marginally loyal customer not even looking at other brands because prices were fine.

[einpoklum]

Supply, to a great extent, is a policy decision. Demand, to a great extent, a policy decision. This is not the silly metaphor of individual consumers and producers acting independently of each other.

[dheera]

It is market failure when normal people can't afford technology that they used to be able to afford.

[jandrewrogers]

This was avoidable. Over $100B of new production capacity in the US alone has been in the works for years. The usual "environmental and community concerns" lawsuits and activism that plagues building in the US has delayed almost every single one of these projects by multiple years.

NIMBYs and degrowth activists own this particular "market failure". The companies have been trying to invest in capacity ahead of demand but have been prevented from doing so.

[throwway120385]

I think it's really easy to blame one or another specific group for the "market failure" but the reality is that if there were 100B worth of capital looking for 1T worth of gross over 10 years there would be a lot of places that would welcome that kind of spending. I think it's probable that in specific places there's been push back, and those places are probably where the work was historically concentrated. But if that's the case, you should really be asking "why is there push back now when there wasn't before?" And I don't think the answer is because the entire community has adopted a "degrowth" agenda. Rather, I think it's going to be more about chemical dumping in the water supply or use of scarce resources that the community would rather not spend for the profit of a few people who don't live there.

I think a lot of people will accept industry when industry tries to be a good steward of the community's environment.

[jandrewrogers]

It is happening to production facilities across the US. Both new production facilities and expansion of existing facilities. The locale doesn't seem to make a difference.

As with the sudden inexplicable "concern" about data center construction, I don't think this activism is organic.

[dec0dedab0de]

As with the sudden inexplicable "concern" about data center construction, I don't think this activism is organic.

I don't think it is sudden, there was much of the same concern about Amazon warehouses and anything else that cuts down trees, disrupting wildlife, and human neighbors. The reason it is more of a concern with modern datacenters is because they don't come with a significant amount of new jobs for the communities they are affecting. People will put up with a lot if means their unemployed loved ones can get on their feet.

With AI being a looming threat to everyone's livelihood it is compounding the reaction, not only do these datacenters not provide new jobs, they are actively contributing to people losing their current jobs.

If these new datacenters were going into empty buildings in cities that already had adequate infrastructure, then no one would care. They would still be against ai in general, but the datacenters wouldn't be a problem.

edit:

They could probably get a ton of support if they went into one of the many cities with crumbling infrastructure, took over abandoned buildings, and paid to fix up the roads and stuff. Like if they moved into an abandoned factory in flint, and fixed the water supply they could be heros.

[overfeed]

You find populism in the US inexplicable in 2026? Where have you been for the past 18 years? You get instant political capital by framing anything as elites vs the common man, and the tech company billionaires cannot escape that "coastal elite" label, or hide that they want to build more data centers.

[overfeed]

Are the NIMBYs in South Korea blocking Samsung too? If not, then the root cause can't be that.

[ashivkum]

there is no serious degrowth movement in the US. absolutely delusional to pin anything, positive or negative, on them.

[epistasis]

Agreed on the insignificance of the degrowth moevement on seriousness. However there is a serious NIMBY movement, and the degrowth movement provides the moral cover for a lot of very selfish people that are not serious about degrowth but wish to accomplish the same goals for individual projects near them.