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?

https://www.trendforce.com/presscenter/news/20221123-11467.h...

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".

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.

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.

As far as I know, the lithography machines are indeed running 24/7 (barring servicing).

https://www.asml.com/en/products/customer-support

That only works out if there are enough investors willing to pay for those futures. If the new factory can make a billion drives but they only have 2 of those futures contracts sold (that is 200k drives) they don't build the factory. Remember too if they sell those contacts they are on the hook to deliver - if it is just investors they will accept the street value of 100k drives in 2028 but some of the people might be buyers demanding physical goods.

Every year a few farmers realize they are contracted to deliver more grain than they have in their bins and so have to buy some grain from someone else (often at a loss) just to deliver it. This isn't a common problem but it happens (most often the farmer is using their insurance payout to buy the grain - snip a very large essay on the complexities of this)

Can you provide some solid examples of companies doing this in an industry with high capex? Yes futures exist but largely in commodity businesses. Because what you described sounds more like pre-purchase agreements which already exist. To have a futures market you would need investors and a product that is more of a commodity and not something highly engineered.

You are also forgetting that the payback period on a plant is not a single year, it will be over many years and most likely no buyer is wanting to arrange purchasing that far out.

I don’t see how what you described sounds is set in reality even for “smart manufacturers”.

Did you pay attention in computer science classes? There are problems you can't simply brute-force. You can throw all the computing power you want at them, but they won't terminate before the heat-death of the universe. An LLM can only output a convolution of its data set. That's its plateau. It can't solve problems, it can only output an existing solution. Compute power can make it faster to narrow down to that existing solution, but it can't make the LLM smarter.

You can't really use compute more because power is already the bottleneck. Datacenter buildouts are now being measured in GW which tells you everything you need to know. Newer hardware will be a lot more power-efficient but also highly scarce for that reason.

But if the demand drops for six months, the manufacturers are going to scale back production.

If it drops for a year, they're likely to start shedding capacity, one way or another.

This is not an equivalent situation. The vast, vast majority of what's being produced for this bubble is going to be waste once it pops.

> 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?

The premise here is that if we use more electricity then we burn more carbon. And the media hates AI, so if anybody restarts any coal-fired power plant to run a data center anywhere, that's the story. But then there's this:

https://electrek.co/2026/01/28/eia-99-of-new-us-capacity-in-...

Nobody actually wants coal because solar is cheaper.

And data centers are a pretty good combination for this because the biggest problem with solar and wind is what to do during multi-day periods of low generation, but data centers have backup generators and would be willing to turn them on whenever the cost of grid power is higher than the cost of operating them. Running some gas turbines for a week every two years in exchange for stabilizing the grid and being able to run on renewable power for the other 103 weeks is a pretty good outcome for everybody, not least because that amount of grid stabilization would exceed their consumption, i.e. allow more renewables to be added to the grid than they're using. If they can shed 1GW of load when a 2GW (long-term average) solar farm is generating at 50% of typical capacity for a week, you can add that 2GW of solar to the grid and remove 1GW of fossil fuels even while the data center is increasing consumption by 1GW.

one.. fully autonomous, self improving, replicating, general intelligence.

> How many degrees of temperature increase is worth one .. whatever the unit of AI gain-of-function is?

Billionaire. And they are definitely willing to make the trade.

My post argues that the demand has permanently shifted.

By the way, plenty of people on HN and Reddit ask if the demand is real or not. They all think there's some collusion to keep the AI bubble going by all the companies. They don't believe AI is that useful today.

I actually agree: a spike in prices due to bumping against capacity limits is way better than a downturn in the market. But this is only really true if AI hyperscalers are incented to space out their big buildouts over time (while raising their prices enough to ration current demand) so that suppliers can have some guarantee that their expanded capacity will be used.

Optical interconnect in the rack is a thing already. It's just a matter of time until it moves to single-PCB scale. And most persistent memories (competing with DDR memory for speed, and with far lower wearout than NAND) are of the "3D storage" type.

If we want reproducible output we already have conventional software. Stop using a hammer on screws.

So it's like humans then

This is wrong for all LLMs which have a temperature setting.

And even if there were guaranteed to be non-deterministic, there is still lots of value in many aspects of content generation.

The housing market is a textbook example of the opposite of a free market. In most markets, anything that does not "improve the character of the neighbourhood" is impossible to build by design.

I can't tell if the comment is above is sarcastic or serious: it could go either way.

The article doesn't mention flash or HDD. It seems that all storage by WD is already sold.

My point is that directly or indirectly all hardware companies depend on memory and storage. If AI companies fall this could have repercussions to the whole industry.

Crypto didn't need vram did it? It was just about hash rate no?

Besides, a 1080 had 8GB, a 5080 has 16GB. Double in 10 years isn't ground breaking. The industry put VRAM into industrial chips. It didn't make it to consumer hardware.

What games have had to deal with instead is inference based up-scaling solutions. IE using AI to sharpen a lower rest image in real time. It seems to be the only trick being worked on at the moment.

I can't think of anything useful crypto did.

Gamers are important because they are consistent customers. Crypto buying of GPUs is done (anyone still in this area is buying ASICs). Meanwhile gamers are still buying GPUs - they do sometimes hold off when the economy doesn't allow, but you can trust that gamers will continue to buy GPUs to play their games and thus they are a safe investment. It is rational to sell CPUs to a gamer for much less than someone in crypto because the gamer will be back (even if the gamer "grows up" there are more replacing them). Thus gamer is an important group while crypto is not.

The above was their prediction during the crypto boom and it turns out correct. I'm not sure how AI will turn out, but it isn't unreasonable to predict that AI will also move to dedicated chips (or die?) in a few years thus making gamers more important because gamers will be buying GPUs when this fad is over. Though of course if AI turns out to be a constant demand for more/better GPUs long term they are more important.

Gamers are not the only important GPU market. CAD comes to mind as another group that is a consistent demand for GPUs over the years. I know there are others, they are all important.

I think they're just a proxy/alias for 'state-of-the-art personal computing'.

I’d rather prefer that the average Joe has a good entertainment system than our corporate overlords has a good surveillance system.

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TBF, all financial market is speculation these days, what only change is the figure/percentage of how much a share is actually the value it's priced.

> 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?

I think the value now comes on how we make a product of it, for example, like OpenClaw. Whether we like or not, AI is really expensive to train, not only in monetary value but also in resources, and the gains have been diminishing with each “generation”. Let's not forget we heard promises that have not been fulfilled, for example AGI or “AI could potentially cure cancer, with enough power”.