| ▲ | appreciatorBus 5 hours 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 4 hours ago | parent | next [-] |
| 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 |
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| ▲ | slashdev an hour ago | parent | next [-] | | 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? | | |
| ▲ | boulos 19 minutes ago | parent | next [-] | | > The entire global software industry is worth less than $1 trillion dollars Are you saying "worth" as a shorthand for something like annual profit? If you sort the 2025 data by earnings, you get pretty large numbers quickly: https://en.wikipedia.org/wiki/List_of_largest_technology_com... That's not how you should measure "worth". In that world, you'd have a P/E ratio of 1. Comparing to a bond, it would be like expecting to get paid the face amount in a single year. Many people are quite happy with 5-10% interest as a risky benchmark, so 10-20 P/E isn't wild. That puts the market cap for tech itself at 10-20T as a reasonable baseline. | |
| ▲ | aurareturn 22 minutes ago | parent | prev | next [-] | | 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.
Apple, Microsoft, Google are all worth 3-4x the global software industry just for some context. | |
| ▲ | arielcostas 14 minutes ago | parent | prev | next [-] | | The problem is "markets can stay irrational longer than you can stay solvent". It doesn't matter when the bubble pops if the governments (especially the US') bail those companies out. The damage is already being done, whether you are a 401k/IRA holder with a position on the S&P 500 way too overweighted by the Mag7&co and their circular dealings, or just needing to buy computer parts way over their market value because some companies are over-leveraging to outcompete you for that hardware (or electricity), or even at a smaller scale by increasing software costs because everything is "AI-powered" now and of course you wouldn't want only "deterministic" software that just works and doesn't have a slop machine integrated. | |
| ▲ | spwa4 26 minutes ago | parent | prev [-] | | If it's a bubble that big it's 1) the only reason any part of the economy is growing at all 2) the only reason US banks aren't bankrupt due to the commercial real estate debacle they got themselves into In other words, if this is a bubble, if this pops, we're back in the 2008 situation. Where banks will go bankrupt one after the other like dominoes (in the sense that this amount is large enough that large banks will fail their financial obligations). And you can argue as much as you want based on "real" valuation metrics but none of your investments, not even cash dollars or even gold, will come out of that one intact. Fortunately, there's the counterargument: you know what else is higher than ever? The revenue produced by the software industry. To the point that at the moment you can say, as crazy as it sounds: if revenue of the big software firms keeps growing the way it IS currently growing, this is not enough investment. In case you're wondering what exactly that means, not enough investment. Think of it like this: you're selling shoes. If you invest too little in new shoes (or whatever resources you need to sell shoes), then you will have to tell customers coming in "sorry, all out of shoes, take your money elsewhere". Currently it's not enough investment. If this growth rate keeps up for 1.5 years, Amazon will have to close the store to anyone who wants more machines. That's where the "spend more now" madness is coming from. Is it unjustified? Well, it appears not. |
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| ▲ | 1vuio0pswjnm7 2 hours ago | parent | prev [-] | | https://www.trendforce.com/presscenter/news/20221123-11467.h... |
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| ▲ | aftbit 13 minutes ago | parent | prev | next [-] |
| 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. |
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| ▲ | anonymars 5 hours ago | parent | prev | next [-] |
| 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...) |
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| ▲ | alexpotato 4 hours ago | parent | next [-] | | 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". | | |
| ▲ | skeeter2020 37 minutes ago | parent [-] | | too bad the bicycle industry didn't learn this. They acted like COVID was the new-normal, and it has resulted in many companies disappearing when they learned the hard way that demand for bikes in a pandemic is neither sutainable nor normal. |
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| ▲ | robinwhg 4 hours ago | parent | prev | next [-] | | 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. | | |
| ▲ | runjake 3 hours ago | parent [-] | | They are indeed planning for more fabs, in order to meet volumes. Last week: “TSMC's board approves $45 billion spending package on new fabs” https://www.tomshardware.com/tech-industry/semiconductors/ts... | | |
| ▲ | aurareturn 3 hours ago | parent [-] | | Silicon Valley is arguing that TSMC isn't investing enough. They should be investing hundreds of billions to build fabs, like how big tech is investing in the AI buildout. $45 billion for new fabs is peanuts compared to Amazon's $200b and Google's $180b investment in 2026. Can't really blame TSMC though. It takes years for fabs to go from plan to first wafer. By the time new fabs go online, demand might not be there. Who knows? | | |
| ▲ | anonymars 12 minutes ago | parent | next [-] | | Ah, that "lays off 50,000 workers because of overhiring" oracle-of-farsight big tech? Little easier than "laying off" a billion-dollar fab, isn't it? | |
| ▲ | runjake an hour ago | parent | prev | next [-] | | According to Elon during his recent Dwarkesh podcast appearance[1], TSMC is limited by resource constraints (fab components, contractors, etc). His claim is that TSMC is building as fast as they can and they are unable to meet industry demand. Seems legit to me. Nonetheless, I think it's a solvable problem. 1. https://www.youtube.com/watch?v=BYXbuik3dgA | | |
| ▲ | throwworhtthrow an hour ago | parent [-] | | If this is actually true, I think you can find a more reliable source than Elon Musk. I'm not saying you should never listen to a word he says. His actions shape the world after all, so it's important to understand how his words precede his behavior. But I'm baffled why anyone would take Elon at his word, or even slightly hedge their perception of reality based on Elon's claims of fact. | | |
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| ▲ | rwmj 3 hours ago | parent | prev [-] | | "Silicon Valley" doesn't get to make the decision unless they are willing to send some of those hundreds of billions to TSMC up front. (TSMC isn't going to want future promises of business either since those are worth very little.) | | |
| ▲ | aurareturn 3 hours ago | parent [-] | | I don't disagree. I wrote the top comment here basically saying the same thing: https://news.ycombinator.com/item?id=46764223 If big tech prepays for the entire fab, I think TSMC would do it. | | |
| ▲ | baq an hour ago | parent | next [-] | | if what Elon recently said is true (if - but he might not be... inaccurate... on this particular thing) they already have and bought the forward production capacity of those new fabs and it still isn't enough. | | |
| ▲ | aurareturn 17 minutes ago | parent [-] | | I believe that. TSMC would have to start another fab or two. PS. I'm pretty sure Intel is also at max capacity. They cancelled a bunch of fabs a few years ago when they were on a spiral. |
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| ▲ | toss1 2 hours ago | parent | prev [-] | | And if the Big Tech companies think it is so important to get all those compute and/or memory chips sooner and in larger supply, it should be no problem at all for those Big Tech companies to pay for the costs and then have priority access to all (or their portion of) the output for the future years. OTOH, if they are insisting on not investing their funds or stock, and it is simply pressure on TSMC to take on the risk, TSMC should be very wary of taking on risk for those players (unless TSMC sees another advantage of producing into a likely glut or supply canyon shortly after the new fabs come online). |
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| ▲ | XorNot 4 hours ago | parent | prev [-] | | 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. |
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| ▲ | philjackson 4 hours ago | parent | prev | next [-] |
| > it takes time to spin up a hard drive factory Very good. |
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| ▲ | kshacker 4 hours ago | parent | prev [-] |
| 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. |
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