Summarizer

Isn't this the case of money going from left pocket to the right, since these companies are owned by the same investment funds? I wonder whether this is some kind of a racket.

"Owned"? You mean they invested

Investors are owners, yes.

Supply and demand. The prices are high because of high demand.

This just highlights what an utter failure and self-inflicted wound the green policies of Euro countries have been. Europe has already lost the AI race to the U.S. and China.

The free market installs a tiny amount of coal, and a lot of renewable energy. Whether you believe this means "coal is/isn't cost competitive with renewables in a free market" is a debate about word definitions that I'm not terribly interested in. Brussels is trying to reduce "tiny" to zero, because of this: https://en.wikipedia.org/wiki/Tragedy_of_the_commons China, like Brussels, is trying to reduce coal for similar reasons. They don't like the air pollution health hazard (fully believable), and they say they don't like global warming (somewhat believable).

but if you don't collude during times of feast you will have famine, and during times of famine you will have famine, in an economy based on feast/famine you must sometimes feast or die.

All of the capital intensive businesses face this issue. Chemicals, Shipping, Semiconductors etc. You get market signals that the demand is there, you acquire the necessary capital, you spend 5 years to build capacity, but guess what, 5 other market players did the same thing. So now you are doomed, because the market is flooded and you have low cash flow since you need to drop prices to compete for pennies. Now you cannot find capital, you don't invest, but guess what, neither your competitors did. So now the demand is higher than the supply. Your price per unit sold skyrocketed, but you don't have enough capacity! Rinse and repeat. Capitalists claim that this is optimal.

The book Capital Returns: Investing Through the Capital Cycle details this phenomenon, including historical cases. If anything, it shows it's possible for you to arbitrage this and in doing so help "smooth out the cycle."

Forecasting demand 5 years into the future is intrinsically highly unreliable. It doesn’t matter if it is capitalism or a command economy. The bet is always going to be risky and someone will have to pay for that risk. At least with capitalism you have many different people with different perspectives on the risk making independent bets. That mitigates the more extreme negative outcomes.

To add to that, investors who do make the bet get punished for over-building, which is better than tax payers paying for it. And before someone says it, big corps do get bailed out by gov't, but that's definitely goes against capitalist ideas.

Also it is government job to regulate. Monopolies should be busted, and behaviour like that should be culled. But US govt is full on AI to mask them cratering their own economy.

Is the DRAM industry really capitalist? Focusing on just the Korean parties, it functions like a command economy. I would say the same about most high end semi-conductor manufacturing, TSMC, Intel, ASML are being commanded and driven by nation-state level decision making. Right now the command is to focus on high wattage centralized AI systems at the expense of everything else.

No one at high levels is capitalist, in ideology or action. An ideological capitalist would be in favor of competition, but these people disdain it and collude regularly. The only 'capitalist' actions they take are by accident, the real goal is as much power/money as possible as fast as possible. We don't even expect companies to plan long-term anymore, it's just moving wealth as fast as possible. That isn't really a change, very few people could ever have been said to be ideological capitalists. (capitalist is not a word with a hard definition, but I'm considering it a different thing than the more modern pure libertarian zero-regulation ideology)

I think the common use of the term capitalist is as a participant in capitalism. This is distinct from someone who is a proponent of capitalism as a system, which appears to be the way you are using capitalist. For which I don't blame you.

Liberalism (in the traditional economic sens) likes competition. Capitalism is a mode of production, and capitalists notoriously don’t like competition when they are the incumbents

> Capitalists claim that this is optimal. Because that does not happen exactly as you say for all players. The demand signals will be processed and long-term risk is balanced against short-term gain in a distributed fashion, so not everyone will do the same.

Sufficient diversity of response will only appear when there are enough competitors. When there are only a few, it doesn't necessarily work out.

It's not optimal, it's pathological. Definitely better than starving under communist dictatorships though.

>Capitalists claim that this is optimal. It's more optimal than planned economies until we have AI planned economies with realtime feedback, I guess. Consumers get cheap goods during oversupply and most inefficient companies get elliminated during bust while consolidation leads to economies of scale.

No this is literally a sign of an unstable system with too high of a gain K. There is an alternative where legislation dampens this behavior but the short term profits will be lower. Hence the hawks don’t like it.

>legislation dampens this behavior Potentially. Well meaning and thought out legislation still distorts the markets, possibly making things objectively worse.

Why is the opposite of capitalist markets automatically assumed to be a command economy? Co-op style businesses aren't really capitalist orientated but are also not reliant on government action.

> Capitalists claim that this is optimal That's not what capitalists claim. Capitalists claim communism is responsible for tens, if not hundreds, of millions of death due to famine. And overall miserable ways of life, as if humans were termites deprived of any individualism and any freedom. Capitalists claim that France importing 500 000 people from the third world each year, out of which only 10% are ever going to work (and these are official numbers) and yet offering them all a safety net is unsustainable. And that that socialism is only going to lead to one thing: running out of taxpayers' money. Capitalists don't claim they have the best system: what they claim is that they haven't seen a less worse one.

The sheer fucking blazing ignorance of this comment > Capitalists claim that this is optimal. Compared to starving under communism coz someone at top got the number wrong, yes. And it only really happens when there are massive, unpredictable market movements and governments not doing their job. Govt should look at the whole thing and just say "no", blame them. No market system self regulates well enough, and it's government job to file down the edge cases like this. But the revolution happened in country which has two utterly incompetent parties, both in pockets of billionaires, fighting for power, and the clowns from one that won last battle use AI to smokescreen the economic growth their actions cratered

> leaving the memory makers in a tough spot Oh noes! Think of a poor memory makers! The amount of money flowing both from the AI bubble and from quite literally scalping both the server and consumer market... They gambled on the opportunity and if they fail - it's their problem.

And how is that a problem and more importantly how's that a problem of Average Joe? Capitalists did their gamble things. If they fail in that gamble what forbids them to sell the regular RAM they made for AI bubbleists to the regular consumers? Besides HBM it's just the regular chips which are exactly the same for the consumer/server market, why it would be any different?

Sounds like they're too big to fail, maybe we should bail them out to reinforce that they will get rewarded for making bad decisions.

Permanent public ownership of (very large stakes in) these companies doesn't seem like such a bad idea anymore, does it? It's what we used to have for most of the 20th century at least in Europe.

Yeah and exactly zero of those companies are European as a consequence. I think we won’t be taking Europe’s lead on this, thanks.

How do you reconcile this capitalistic zeal with how opposed to honest capitalism these companies are?

I reconcile that with the fact that Europe doesn't make enough DRAM for me.

So, as long as you can have your desires met, you don't really care about however much harm happens to anyone?

Neither does anyone else, as is being demonstrated currently.

Good luck actually pulling that off, it'll just kneecap US/Western industry, just as the current tariff and war madness has helped drag the US economy into the gutter.

Surely this can be solved with financial engineering. The memory makers build more capacity, but they finance it with something like floating-rate notes linked to an index of memory prices, or even catastrophe bonds or AT1s. Or more crudely, set up special purpose vehicles to build the extra capacity, and issue convertible bonds from those; if the memory market collapses, investors don't get paid, but they do get a memory factory.

It's a business with huge up-front capital expenses and typically very low margins. Supply is scaling up slowly because it's hard, and if you overshoot, you go out of business. Nobody is "allowing" this. It's a natural property of being both advanced technology and a commodity at the same time.

Because for the last 60 years we've allowed big business to buy and hollow out our legal and education systems.

Allowed? We live in a neoliberal world where corporate monopolies / oligopolies aren’t even remotely regulated. If you try to do even the gentlest regulation of companies people scream about communism and totalitarianism. Unless the regulation serves the monopolies by making it harder to enter the market. It started with raegan, and even parties on the “left” in the west believe in it with very few exceptions.

> We live in a neoliberal world where corporate monopolies / oligopolies aren’t even remotely regulated. If you try to do even the gentlest regulation of companies people scream about communism and totalitarianism. Unless the regulation serves the monopolies by making it harder to enter the market. The thing that enables this is pretty obvious. The population is divided into two camps, the first of which holds the heuristic that regulations are "communism and totalitarianism" and this camp is used to prevent e.g. antitrust rules/enforcement. The second camp holds the heuristic that companies need to be aggressively "regulated" and this camp is used to create/sustain rules making it harder to enter the market. The problem is that ordinary people don't have the resources to dive into the details of any given proposal but the companies do. So what we need is a simple heuristic for ordinary people to distinguish them: Make the majority of "regulations" apply only to companies with more than 20% market share. No one is allowed to dump industrial waste in the river but only dominant companies have bureaucratic reporting requirements etc. Allow private lawsuits against dominant companies for certain offenses but only government-initiated prosecutions against smaller ones, the latter preventing incumbents from miring new challengers in litigation and requiring proof beyond a reasonable doubt. This even makes logical sense, because most of the rules are attempts to mitigate an uncompetitive market, so applying them to new entrants or markets with >5 competitors is more likely to be deleterious, i.e. drive further consolidation. Whereas if the market is already consolidated then the thicket of rules constrains the incumbents from abusing their dominance in the uncompetitive market while encouraging new entrants who are below the threshold.

First, on the surface, this sounds like a terrible idea. Almost all ideas that I see on HN about economics fail with even the tiniest amount of common sense. As a counterpoint: Look at very high value goods, like jet engines and MRI machines. I went for an MRI the other day and wondered to myself (then asked an LLM) what the international MRI market looks like. They are vanishingly small number of manufacturers and are usually dominated by a few international players. How are you going to apply this tax to non-domiciled (international) companies? Also, companies like General Electric, Mitsubishi Heavy, and Seimens are enormous and incredibly diverse. This idea falls apart quickly.

> Arguably a more efficient approach might just be to have a tax that adds on to corporate tax incrementally for every % of market share a company has above say 7-8%. How is this more efficient? You'd still be applying all of the inefficient regulatory rules intended to mitigate a lack of competition to the smaller companies trying to sustain a competitive market, and those rules are much more deleterious for smaller entities than higher tax rates. If you have $100M in fixed regulatory overhead for a larger company with $10B in profit, it's only equivalent to a 1% tax. The same $100M for a smaller company with $50M in profit is a 200% tax. There is no tax rate you can impose on the larger company to make up for it because the overhead destroys the smaller company regardless of what you do to the larger one.

love that theres virtually infinite capital there. meanwhile in the rest of the world there is virtually no food.

The "no food in other countries" is because of failed/corrupt governments, not because people use AI to generate cat pictures in the West. The economy is not a "fixed pie" that needs to be allocated among people of the world. Just look at Cuba, which could be a very rich country and one of the prime tourist destinations of the world.

Both of those problems exist largely or primarily due to the US, destabilizing countries with bombs and coups, and the cuban blockade.

are you kidding? if spent all that money on food you guys would just use it to bullshit all day and make funny pictures, while if we spend it on AI..

I'm skeptical - the apps I use either have a) enough lock-in that they don't have the institutional will to optimize or b) a lack of institutional resources to optimize. Basically, the optimizing that can happen is that I ditch heavy tools in favour of lighter ones, and hopefully enough other people do the same to help lighter tools with finances/dev resources.

What you say is absolutely true, and is a serious problem—but the way our system operates does not allow us to correct for it. Anyone trying to spin up a competitor to TSMC would have to first overcome a significant financial hurdle: the capital investment to build all the industrial equipment needed for fabrication. Then they'd have to convince institutions to choose them over TSMC when they're unproven, and likely objectively worse than TSMC, given that they would not have its decades of experience and process optimization. This would be mitigated somewhat if our institutions had common-sense rules in place requiring multiple vendors for every part of their supply chain—note, not just "multiple bids, leading to picking a single vendor" but "multiple vendors actively supplying them at all times". But our system prioritizes efficiency over resiliency . A wealthy nation-state with a sufficiently motivated voter base could certainly build up a meaningful competitor to TSMC over the course of, say, a decade or two (or three...). But it would require sustained investment at all levels—and not just investment in the simple financial sense; it requires people investing their time in education and research. Dedicating their lives to making the best chips in the world. And the only reason that would work is that it defies our system, and chooses to invest in plants that won't be finished for years, and then pay for chips that they know are inferior in quality, because they're our chips, and paying for them when they're lower quality is the only way to get them to be the best chips in the world.

> the way our system operates They have the other system.

This bit, I mean: > A wealthy nation-state with a sufficiently motivated voter base could certainly build up a meaningful competitor to TSMC over the course of, say, a decade or two (or three...).

What’s the lose scenario for them? They’re basically a cartel, and you need ram irregardless. If they make less it’s still a cost:demand, just not the most optimal for them. They’ve done that math, and figure this is the best risk and reward for them. Your goodwill or opinion doesn’t matter to them, because you need them more than they need you.

It will last forever. After covid, all manufacturers understood the value of limiting supply and extracting profits. Cars used to super cheap before covid, they will never go back to the same levels. From now on, RAM will always be super costly for consumers, because they can't make massive deals like Apple/OpenAI/etc. We are the bagholders.

Of course, clearly businesses were just stupid before and only learned how to make revenue in 2021.

When lithium prices decreased over 80% from 2022 to 2025, it was because lithium miners felt altruistic. Car manufacturers were feeling greedy. This is how bad the thinking has gotten.

>> Cars used to super cheap before covid Have they really ever been cheap? Also Tesla 3 is cheaper now, Yaris is still cheap as well.

Covid inflation was because of supply chain disruptions, loose fiscal policy (like Biden's ARP which a Central Bank analysis said added a few % to annual inflation), and money supply expansions. There was less goods and more money. When you go and trade money for goods, it should be obvious what happens.

if a shortage lasts years, it's not a shortage. "The market clearing price of RAM in the face of expected sustained healthy demand should lead to a stable market for years." even if gaming is and will remain very popular for years, it and the desire to upgrade gaming rigs is still a discretionary activity with more price elasticity of demand than corporate uses for RAM in the dawn of the AI age. gamers live on the margin of this market, where low prices will stimulate upgrades and high prices will lead to holding out. The complaints about price are real, but that segment of the market is some combination of less large and less important.

i could have used lemons and lemonade stands to explain supply and demand, the lesson is still the same. letting the market set prices ensures that the chips go to the critical markets and uses. less critical uses will not allocate funds for purchases.

letting the market set prices ensures that the chips go to the critical markets and uses. Can you please elaborate what you mean by "critical market"? Edit: formatting

If only we have not allowed oligopolies to exist. Meanwhile, EU is not in the race at all and US has very few fabs.

People don't want to pay more every day so they can pay less in an emergency.

I want those AI companies that drove the prices up, to pay an immediate back-tax to all of us. I don't want to pay more because of AI companies driving the price up. That is milking.

I fear the author and most commenters are not aware of the law of demand and supply. If there is demand for consumer RAM, there will be supply for consumer RAM. It just takes time and risk-assessment to scale up operations. We have RAM shortage now, we will have very cheap RAM tomorrow. It’s not like production is bottlenecked by raw materials. Chip companies just need to assess if the demand by AI companies will last so it’s better to scale up, or perhaps they should wait it out instead of oversupplying and cutting into their profits.

The law of supply and demand works in a perfect competition market. There are two RAM suppliers...

>I fear the author and most commenters are not aware of the law of demand and supply I cannot stand how you and people like you try to justify everything by supply and demand. Also you act like it's some natural law of nature. It's not a law of nature- if you took an economics class you would realize it's try to maximize PROFIT. It's not for the good of the people. All of these things are a CHOICE that people are making to now completely screw the average person for, again, the needs of big corporations and the top 0.01%.