A couple of naive questions:
1. What's the bottleneck in ramping up RAM production? Is it the availability of silicon itself? Or the factories are at capacity?
2. Is this supposed to ease up despite the AI boom? Definitely would ease up if busted.
2. Eventually more plants will come on line. Most of the main manufacturers have announced expansions but these can take O(years) to come online.
If the bubble bursts and RAM demand drops, then they'll have big losses. And that's not an impossible scenario over the few X years that it takes to build a plant
They sold their allocations to people who don't have a clear path to profitability, and were paid with massive amounts of money that don't exist in reality.
How's that possible?
The principle works for stable regular businesses where invoices do get paid, not for bubbles.
Stable, regular businesses generally don't take on massive amounts of debt as a matter of accomplishing their value proposition. Maybe they take on the debt as a part of an expansion into a new geographic market or on developing a new product, but they typically have cash reserves to help fund those things. Accordingly the debts are relatively small and there's at least some collateral to secure them.
Any kind of bubble, on the other hand, is, by definition, financially massive. People taking on debts take on huge debts with the hopes of huge rewards. The problem is, the debts are so huge that neither the debtor nor creditor can allow them to go unpaid.
When you reach the scale of debt that you see for AI - literally trillions of dollars - the creditor isn't just a bank or a few investors, they're entire segments of the economy. The debtors can use that as leverage to get what they want. The Great Recession is a prime example of this. You had the US government print out or borrow $700 billion-ish dollars to absolve financial institutions of the toxic mortgage-backed securities on their balance sheets. Now, could they have simply declared bankruptcy and had the assets on their balance sheets claimed by other parties? Maybe, but that would have taken too long for most people's comfort and, moreover, would have been embarrassing for the country's monied elite. There had to be a bailout to keep a bunch of things solvent in the near-term, and they got one.
You could see this here: AI companies have everyone on the hook for their bets, and if it doesn't work, you can't simply write off the value of shares of everyone who has backed the bet.
They're too big to fail. If you owe the bank $1 million, you have a problem. If you owe the economy $1 trillion, the economy has a problem.
For a RAM manufacturer, the incentive is to ramp up production AND prices. I doubt any of the names in the business is doing any work at all to lower their unit prices.
Safe to say they're not in it out of sheer altruism.
I don't understand what you mean by "sustainable". The whole industry tripled their process AND is maxing out their production lines. They are cashing out as expected.
It matters nothing if this trend can't be kept up for years, because by then their output still meets demand AND they will be sitting on a huge bag of cash.
I think you are confusing "I don't want to pay this much" with "this isn't sustainable". The sellers are cleaning up stock at a huge markup and buyers are still buying like crazy.
Will there be a budget phone market with these prices? What about budget laptops? Can there exist a gaming console market when memory costs are so high? And what happens to the companies that sell goods and services to the users of those devices?
And obviously, if people see that you're extracting an exorbitant amount of profit, you're gonna have a lot more people eyeing your industry as ripe for competition, since some company would probably not mind eating some of your pie. I'd say that the current memory cartel has a very real risk from China right now. And if you get competition during the boom period, you're also gonna be competing with them during the bust period too.
that is a 20T market
they dont need you to afford a subscription, they need your boss to replace you with their service