[glimshe]

There's clearly easy/irrational money distorting the markets here. Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay. But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies.

Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI.

[appreciatorBus]

Regardless where demand comes from, it takes time to spin up a hard drive factory, and prices would have to rise enough that, as a producer, you would feel confident that a new hard drive factory will actually pay off. Conversely, if you feel that boom is irrational and temporary, as a producer you’d be quite wary of investing money in a new factory if there was a risk it would be producing into a glut in a few years.

[aurareturn]

I'll add that the GPU, CPU, storage, and RAM industries crashed in 2022 after a Covid-induced boom.[0]

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

[anonymars]

If I remember during a previous GPU shortage (crypto?), Nvidia (and/or TSMC?) basically knew the music would stop and didn't want to be caught with its pants down after making the significant investments necessary to increase production

Not to mention that without enough competition, you can just raise prices, which, uh (gestures at Nvidia GPU price trends...)

[aftbit]

You're talking about how higher prices can motivate higher supply. The parent commenter was talking about how higher prices shift the current point on the demand curve to the right. If hard drives sold for $1 billion per gigabyte, we wouldn't see even AI companies buying as many as they are, and current production would go idle. Even assuming supply is locally inelastic (as it is given no time or space to scale, or given a lack of confidence that scaling is wise), you should be able to find a price point that avoids supply shortages by manipulating demand.

Thus far, we've not found that point.

[philjackson]

> it takes time to spin up a hard drive factory

Very good.

[squidbeak]

The problem with this expectation of usual market behavior is that demand from AI will still be unsatisfied even after buying out the current providers' whole supply, so any new manufacturer entering the market will also prioritize high-paying AI companies above consumers.

[kshacker]

Are these factories already running 24/7 that labor can't be added to make more without adding capital infra?

And if they were running 24/7, maybe setting up another factory or line will avoid some of the 24/7 scheduling.

[infecto]

No it’s not an easy fix. Manufacturers don’t have a good pulse on long term demand. The he capex to spin up a new manufacturing plant is significant. Especially with the recency of Covid where some folks did get caught with their pants down and over invested during the huge demand boom.

I don’t quite follow the narrative like yours about nation states and investors. There is certainly an industrial bubble going on and lots of startups getting massive amounts of capital but I here is a strong signal that a good part of this demand is here to stay.

This will be one of those scenarios where some companies will look brilliant and others foolish.

[londons_explore]

Smart manufacturers will sell 'hard drive futures'. Ie. "Give us $100/drive now for 100k drives for delivery in march 2028".

These contracts are then transferrable. The manufacturer can start work on a factory knowing they'll get paid to produce the drives.

If the AI boom comes to an end, the manufacturer is still going to get paid for their factory, and if the AI company wants to recoup costs they could try to sell those contracts back to the manufacturer for pennies on the dollar, who might then decide (if it is more profitable) to halt work on the factory - and either way they make money.

[xpe]

> Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay.

This sounds like economic dogma based on pointing at some future equilibrium.

I like the saying that goes something like "life is what is happens when you are waiting for the future". In the same way, it seems to me that equilibrium is increasingly less common for many of us.

Markets are dynamic systems, and there are sub-fields of economics that recognize this. The message doesn't always get out unfortunately.

> But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies.

This feels like more dogma: find a convenient scape-goat: governments.

Time to wake up to what history has shown us! Markets naturally reflect boom and bust cycles, irrationality of people, and various other market failures. None of these are news to competent economists, by the way. Be careful from whence you get your economic "analysis".

[pixl97]

Yes, this is why the prices of housing has dropped dramatically. The market stepped up and filled the demand needed and now everyone can afford a place to live

.....

[tasuki]

> Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI.

Cheap hard drives and ram, yay! Perhaps GPUs too!

[ASalazarMX]

You wish. More likely all that data center capacity will be used to sell something as nefarious, like VDI for the masses. You won't need RAM, disk and GPUs when you can rent those from OpenVDI.

[zozbot234]

It's hard to increase long-run production capacity for what seems to be clearly a short-term spike in datacenter buildout. Even if AI itself is not much of a bubble, at some point spending on new AI facilities has to subside.

[thisisit]

This is what a business cycle looks like.

Seeing the first mover succeed, every Tom, Dick and Harry wants to emulate. It distorts the price because people would pay premium for everything. Then there is surplus supply and no takers. People are caught with their pants down and things go for cheap.

This repeats ad nauseum. Whether it was building ISPs during early 2000s or the abundance of streaming service where every media company wanted one. Just because the corporate overlord doesn't want to look foolish for not following a trend.

[mrweasel]

AI is going to be what fiber was to the dotcom bubble. Someone spend a lot of money on a lot of infrastructure, some of which is going to be incredibly useful, but sold for much less than it cost to build. Hardware just depreciates much much faster than fiber networks.

[aurareturn]

I'm not saying that data center buildouts can't overshoot demand but AI and compute is different than fiber buildout. The more compute you have, the smarter the AI. You can use the compute to let the AI think longer (maybe hours/days/weeks) on a solution. You can run multiple AI agents simultaneously and have them work together or check each other's work. You can train and inference better models with more compute.

So there is always use for more compute to solve problems.

Fiber installations can overshoot relatively easily. No matter how much fiber you have installed, that 4k movie isn't going to change. The 3 hours of watch time for consumers isn't going to change.

[baq]

current shortages are exactly the result of fabs not wanting to commit extra capex due to overbuild risk and inference demand seems to be growing 10x yoy; you've famously got 8 year old TPUs at google at 100% load.

[ido]

    Hardware just depreciates much much faster than fiber

The manfucaturing capacity expanded to meet the demand for new hardware doesn't (as much)

[hmmmmmmmmmmmmmm]

This goes beyond profits. It will be important for national security.

[aurareturn]

  There's clearly easy/irrational money distorting the markets here.

No, I think it is real demand.

AI will cause shortages in everything from GPUs to CPUs, RAM, storage, networking, fiber, etc because of real demand. The physical world can't keep up with AI progress. Hence, shortages.

AI simply increases computer use by magnitudes. Now you can suddenly use Seedance 2.0 to make CGI that would have cost tens of millions 5 years ago for $5.[0] Everyone is going to need more disk space to store all those video files. Someone in their basement can make a full length movie limited only by imagination. The output quality keeps getting better quicker.

AI agents also drastically increase storage demands. Imagine financial companies using AI agents to search, scrape, organize data on stocks that they wouldn't have been able to do prior. Suddenly, disk storage and CPUs are in high demand for tasks like these.

I think the demand for computer hardware and networking gear is real and is only the beginning.

As someone who is into AI, hardware, and investing, I've been investing in physical businesses based on the above hypothesis. The only durable moats will be compute, energy, and data.

[0]https://seed.bytedance.com/en/seedance2_0

[pjc50]

> The only durable moats will be compute, energy, and data

"Compute" is capital investment; normal and comprehensible, but on a huge scale.

"Data" is .. stolen? That feels like a problem which has been dodged but will not remain solved forever, as everyone goes shields-up against the scrapers.

"Energy" was a serious global problem before AI. All economic growth is traded off against future global temperature increases to some extent, but this is even more acute in this electricity-intensive industry. How many degrees of temperature increase is worth one .. whatever the unit of AI gain-of-function is?

[mbreese]

The question isn’t if the demand is real or not (supplies are low, so demand must exist). The question is if the demand curve has permanently shifted, or is this a short-term issue. No one builds new capacity in response to short term changes, because you’ll have difficulty recouping the capital expense.

If AI will permanently cause an increase in hard drives over the current growth curve, then WD, et al will build new capacity, increasing supply (and reducing costs). But this really isn’t something that is known at this point.

[azan_]

I wonder if I'm alone in being optimistic about this. I believe that the gigantic inflow of money into hardware will lead to large increase in production capabilities, accelerated progress and perhaps even new, better architectures.

[xtracto]

This fact never ceases to amaze me. It's so cool how relentlessly AI is pushing the horizons of our current hardware!

Maybe now we will start to see the "optical" CPUs start to be a thing. Or the 3D disk storage,;or other ground breaking technology.

[lelanthran]

> AI will cause shortages in everything from GPUs to CPUs, RAM, storage, networking, fiber, etc because of real demand.

Real demand, sure, I agree, but maybe not retail or business demand; at the moment the "demand" is entirely VC demand.

It's a really distorted market which is to be expected in any bubble/hype phase. The current retail/business demand doesn't appear to exist at the price point these investments require - even at the low low cost of "free, gratis and for nothing", not enough consumers and businesses are signing up.

The ones really going all-in on AI are the slop-producers. I dunno if slop is enough to pay back the investment into AI - I mean, even the slop producers are going to realise that paying $200/m to produce something in 1/10th of the time is a race to the bottom because someone else on the same plan is going to do the same, but cheaper.

> The physical world can't keep up with AI progress. Hence, shortages.

I think the word "progress" is inaccurate there - the physical world supply product at the demand maintained by VC's money.

It's not "cannot keep up with progress", it's "cannot keep up with demand from VCs".

> The only durable moats will be compute, energy, and data.

That'll be a first :-) Physical commodities have never been moats on their own before.

[anthk]

AI's output is not reproducible. It's a disaster.

[xnx]

> Normally this wouldn't be a problem: prices would go up, supply would eventually increase

Sounds right

> there's no price that is too high for these supplies.

Are you saying even higher prices won't increase supply? I don't understand.

[zymhan]

A comment above yours clearly explains why:

https://news.ycombinator.com/item?id=47034480

[ghywertelling]

Earlier gamers got punished by crypto and now they are being punished by AI.

[pjc50]

"Punished" implies a moral valence to the whole thing which isn't there. It's not like the AI companies were aware of gamers and set out to do this. You simply got run over, like everyone else in front of the trillion dollar bulldozer.

[high_na_euv]

So what?

Why gamers must be the most important group?

[numpad0]

GPUs before crypto had a lot less amount of VRAM. Crypto investment funded a lot of stupid experiments, of which some did stick to the wall. I don't think gamers had lives completely ruined by crypto in the end.

[bko]

Higher price encourages more supply. Typically when you see a acute shortage, its quickly followed by a glut as supply starts coming online in an over correction.

[pixl97]

These factories take years to make and massive amounts of money. That and there are so few manufacturers now they are far more likely to collude

[BoredPositron]

The quote was from the screenwriter he never said it.

[Xunjin]

Loved the reference. Probably from Margin Call[0]

0. https://youtu.be/fij_ixfjiZE

[mcny]

I like to imagine the reference in the movie margin call is that of a merry go round or a game of Musical chair. Like we are all on a ride, none of us are the operator, and all we can do is guess when the music will stop (and the ride ends).

The problem with this AI stuff is we don't know how much we will be willing to pay for it, as individuals, as businesses, as nations. I guess we just don't know how far this stuff will be useful. The reasons for the high valuation is, in my guess, that there is more value here than what we have tapped so far, right?

The revenues that nVidia has reported is based on what we hope we will achieve in the future so I guess the whole thing is speculation?

[pier25]

I think AI companies are involving these other industries so when the money runs out they will claim the whole thing is too big too fail.

[peyton]

By buying flash and thus shifting demand to HDD? How does that work?