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appreciatorBus | 14 days ago

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.

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aurareturn|14 days ago

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

slashdev|14 days ago

I bet the same thing happens when the AI bubble pops.

"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?

throwerxyz|14 days ago

You act like this wasn't just the same as it has always been.

It's always been cycles of cheap production and then human created demand or catastrophes to reduce supply and increase prices back up again.

anonymars|14 days ago

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...)

alexpotato|14 days ago

Similar thing happened with mask manufacturers during COVID.

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".

robinwhg|14 days ago

I believe the TSMC CEO said that in a recent interview. They're aware that their now biggest customer Nvidia has a less broad product portfolio than Apple and the high volumes they buy propably won't last. It's too much of a risk to plan more Fabs based on that.

XorNot|14 days ago

Somewhat ironically the AI boom means Nvidia would've easily made their money back on that investment though and probably even more thoroughly owned the GPGPU space.

But as it is it's not like they made any bad decisions either.

aftbit|14 days ago

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|14 days ago

> it takes time to spin up a hard drive factory

Very good.

squidbeak|14 days ago

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.

m4rtink|13 days ago

Sure - the question is how long they can remain high-paying.

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.

kshacker|14 days ago

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.