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
"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?
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.
Time will tell.
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.
Is Microsoft 3x more important than OpenAI and Anthropic combined? Personally no. I think the value generated by OpenAI and Anthropic will surpass Microsoft.
But arguing about the details is kind of missing the point. Microsoft's value is also inflated by the AI bubble and can't be used as a point of reference.
[1] https://www.grandviewresearch.com/industry-analysis/software...
AI has had very little to do with MSFT growth. Pretty sure the 2023 lows were a response to the massive AI spending, and the recovery mostly due to continued Azure services growth.
Are you saying "worth" as a shorthand for something like annual profit? If you sort the 2025 data by earnings, you get pretty large numbers quickly: https://en.wikipedia.org/wiki/List_of_largest_technology_com...
That's not how you should measure "worth". In that world, you'd have a P/E ratio of 1. Comparing to a bond, it would be like expecting to get paid the face amount in a single year. Many people are quite happy with 5-10% interest as a risky benchmark, so 10-20 P/E isn't wild. That puts the market cap for tech itself at 10-20T as a reasonable baseline.
The damage is already being done, whether you are a 401k/IRA holder with a position on the S&P 500 way too overweighted by the Mag7&co and their circular dealings, or just needing to buy computer parts way over their market value because some companies are over-leveraging to outcompete you for that hardware (or electricity), or even at a smaller scale by increasing software costs because everything is "AI-powered" now and of course you wouldn't want only "deterministic" software that just works and doesn't have a slop machine integrated.
That's my guess.
Aka: take a seat, it will be a while
It's always been cycles of cheap production and then human created demand or catastrophes to reduce supply and increase prices back up again.
Not to mention that without enough competition, you can just raise prices, which, uh (gestures at Nvidia GPU price trends...)
But as it is it's not like they made any bad decisions either.
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".
Last week: “TSMC's board approves $45 billion spending package on new fabs”
https://www.tomshardware.com/tech-industry/semiconductors/ts...
$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?
If big tech prepays for the entire fab, I think TSMC would do it.
OTOH, if they are insisting on not investing their funds or stock, and it is simply pressure on TSMC to take on the risk, TSMC should be very wary of taking on risk for those players (unless TSMC sees another advantage of producing into a likely glut or supply canyon shortly after the new fabs come online).
PS. I'm pretty sure Intel is also at max capacity. They cancelled a bunch of fabs a few years ago when they were on a spiral.
Seems legit to me. Nonetheless, I think it's a solvable problem.
I'm not saying you should never listen to a word he says. His actions shape the world after all, so it's important to understand how his words precede his behavior. But I'm baffled why anyone would take Elon at his word, or even slightly hedge their perception of reality based on Elon's claims of fact.
Did you listen to the conversation? There was a great amount of detail. Which parts of the conversation seemed unbelievable to you?
Regardless, it's also been reported in the press over the past quarter, and TSMC's previously largest customer, Apple, notably has had to make fab adjustments and form new partnerships with Intel.
https://stratechery.com/2026/tsmc-risk/
https://www.eetimes.com/tsmc-will-struggle-to-meet-ai-demand...
And even the TSMC CEO himself has acknowledged it on multiple news sources. Here's just one:
"Demand is 3 times higher than what TSMC can produce"
https://wccftech.com/tsmcs-ceo-admits-chip-production-is-ins...
Hopefully, the CEO of the company in question is good enough for you?
No, and I'm sorry for derailing your point. Thank you for the additional links. I skimmed them all but didn't see anyone corroborate the claim that TSMC is limited by its upstream component suppliers, rather than its own factory underinvestment in prior years. Am I misunderstanding, and those two things are the same?
But, you are certainly correct that factory underinvestment is likely the primary cause for being in this predicament.
Little easier than "laying off" a billion-dollar fab, isn't it?
Last time I checked you cant build Chip Fabs with cloud credits.
meanwhile, regional grid operators are faced with Big Tech driving tens of % of total power into private contracts where there's only one customer; they are making the decisions normally reserved for nation-states, right? reopening Three Mile Island sounded like a pipe dream a few years ago. I hear They have something like 50 more experimental, small-scale NPPs they want to fire up across the country in the next few years, too (but despite sounding like a big boon for energy, they're ~meaningless short-term in the face of how much demand we're looking at). -so this power (uh, literally) gets wrested away from the grid authorities and from what was largely the domain of government, to now be managed by techbros and a select few partners who will be reliant on their money; I'm sure that will work out fine.
anyway, part of the reason it does make some sense in the US for the government to push for more coal/LNG turbines, is because they're already there and we need them now; the permitting to un-mothball, prevent mothballing, or expand facilities, is far less arduous than what a company'd have to go through for a new facility (tho again, we don't have capacity to build all the turbines we require inside 5 years anyway). I'm not saying it's a good idea to start sending up more GHGs, but it's maybe better than pricing out electricity for residences and "real" industry. hey, who knows? maybe they'll simply build natural gas pipelines that don't leak this time.
-oh, and then there's the problem with these new datacenters disrupting the traditional power demand curve, because they don't really do as much peak draw anymore; their peak draw is approaching base load, as LLM batching (when a company has a bunch of stuff they want processed and can wait a day for it to run in "off-hours") is sold, and if unsold, that time can be used as training time; so the modern datacenter is a 24/7/365 organ; the heart, powering our society, Moltbook. the importance of this is it makes solar less financially attractive, because now we need to be able to bank more energy since more demand's shifting to overnight. we might also want to consider just getting the moon really, really hot? then we can get a truly substantial haul of lunar light for our panels. you know, we decided against nuking hurricanes again recently; maybe we could build some new ones and nuke the moon, a lot.
This is the same for more or less all major industrial users of electricity. Typically it's a boon for a power grid and overall lowers prices due to the stable consumer that helps you achieve very high capacity factors on your generation side. Large industrial users typically pay for a "max usage rate" (e.g. they commit to 200MW and will always pay for 200MW even if they only use 180MW average that billing period) due to the infrastructure needed to serve them - so it's as close to guaranteed money a power grid operator is likely to ever get.
If we want to re-industrialize the nation to any meaningful degree, we are going to need more baseload. AI datacenters may be a bubble, but if we can't somehow leverage the unlimited free money being poured into this space to augment our electric grid and build generation capacity for the first time since the Greatest Generation, we will have entirely failed as a society. The fact we have made it more compelling for folks to work out private deals with nuclear power plant operators to go behind-the-meter vs. just taking it from the grid is utterly absurd and shows how absolutely impossible it is to get anything done these days. These were last-ditch options after operators got frustrated trying to do things the usual way with years to decades of delays.
What is really happening at a very high level zoomed out: As a nation we decided to stop investing in energy infrastructure for over 50 years, and we are now reaping what we have sown. Eventually you run out of the previous generation's infrastructure investments, and also run out of cheap parlour tricks like sending industry overseas and focusing on energy efficiency vs. actually building stuff.
We get to figure out how to build things again or die trying. The AI bubble has only brought the demand forward a few years - anyone paying attention to this sector knew grid instability was effectively written in stone without major changes. Take our electric grid out of the hands of politicians and put it back in the hands of engineers and planners that actually can do things. You can't even build a transmission line of any length or size these days without a decade or more of legal battles and NIMBY. Good luck with the actual size of investment we need today.
tldr; We deserve all the pain we collectively get. You can only ignore problems for so long to take short term gains. Chickens coming home to roost in this arena, among many others. Once you stop investing in the future, the future eventually comes for you.
Thus far, we've not found that point.
Very good.
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.
And if they were running 24/7, maybe setting up another factory or line will avoid some of the 24/7 scheduling.