I’m willing to spend a lot to drive down the price. As a show of good faith, I promise not to actually pay any more than 50% of what you can get on the used market.
Obviously, spending additional dollars on purchasing RAM will drive the price of RAM up.
Just as obviously, spending additional dollars on manufacturing RAM will drive the price of RAM down.
This particular market is pretty clearly not functioning well, and there are textbook Econ 101 reasons why a market may not function well. Of those textbook reasons, I suspect the most obviously applicable one here is large barriers to entry.
Econ 101 would be understanding that you can’t snap your fingers and have a new DRAM factory online overnight, and that this isn’t an indicator that the market is not functioning.
You’re defining a market “functioning well” as meaning the price is low for you and all demand is satisfied immediately without raising prices.
That’s not really what is meant by functioning markets. A functioning market does allow the price to increase as this is what spurs investment into new capacity and new developments.
It also allows the DRAM to go to the most profitable activities. This is actually what the whole Georgism and Land Value Tax people advocate for with property taxes, which bizarrely many people think they like: The idea is to raise the price of something (in that case, your property tax) to ensure it’s not being “wasted” on an economic activity that isn’t optimal. The most optimal economic activity is the one that can afford to pay the most, which is the one that captures the resource.
It’s not fun when your use case isn’t the one that can pay the most, but that’s literally how markets work.
Wasn't there this whole legal thing a couple of years ago involving most of the dram manufacturers?
You can quibble over my usage of “functioning,” but all I’m referring to are the textbook characteristics of perfect competition. I’m not claiming that someone is to blame if any of these conditions don’t hold. Of course they never hold perfectly in practice!
I’m not trying to blame anyone for the fact that it takes a lot of money and time to get a new DRAM factory online. I’m just saying that this fact is bad for essentially everyone except for the small number of current DRAM producers.
> You’re defining a market “functioning well” as meaning the price is low for you and all demand is satisfied immediately without raising prices.
Well, yes, that’s pretty much the only reason to advocate for competitive markets, isn’t it? If you don’t want allocative efficiency and productive efficiency, then what do you want?
A calculated move. If they're right and the AI demand is a fluke, they don't overinvest in expensive manufacturing infra, they don't get saddled with more capacity than they need, and there is no memory glut eating their margins in the future. If they're wrong and the AI demand isn't a fluke, they get to pad their margins big time, and the supply bottleneck isn't their problem. As long as they shake hands and bet on "fluke" in sync, the downside is very limited for all of them.
They shook hands, they bet in sync, and they were wrong. Now the supply bottleneck is everyone's problem.
Potentially even theirs - if Chinese vendors can use it to wedge themselves into the market when it's at its most lucrative, and invest in growth. Which they almost certainly will.
Let's not rewrite history: Sam Altman kicked this off by trying to corner the memory market to get an edge over his competition...in return for only a year's supply of memory. The resulting supply squeeze has been very profitable to the RAM manufactures, and will last many multiples of OpenAI's initial contracts, so they can't be too mad at him for bot disclosing his other wafer deals during negotiations. They can afford to gift him a thank-you yacht named the "Adverse Supply Shock"