Monologue: Blame AI For Making Everything More Expensive

In this week's Better Offline monologue, Ed Zitron runs you through how AI is inflating the price of memory across the board by diverting fab capacity to building high bandwidth memory for GPUs, and how this situation may end in disaster for everyone involved. GamersNexus: The DRAM Cartel https://www.youtube.com/watch?v=jVzeHTlWIDY HBM to increase 90% Year over Year - https://x.com/pequityresearch/status/2075035164833382909?s=46 Please subscribe to my premium newsletter - save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/ Discord: chat.wheresyoured.at https://discord.com/invite/QUUQUP9szv Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [email protected] mailto:[email protected] See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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• 0:37Ed Zitron?

  Hello and welcome to this week's Better Offline Monologue. I'm your host, Ed Zitron.

• 0:49Ed Zitron?

  And today I'm talking about the great parasite of AI and how it's making everything more expensive. And to be clear, before we go any further, what you're seeing in these remarkable sales from Nvidia and all the RAM companies and Broadcom and all them isn't a measure of industry demand, but of speculative purchasing based on the vaguest of projections. Because the actual demand for AI, the actual revenue generated by this industry is kind of pathetic. And honestly, we don't really have any reason to build these data centers. Nobody has trouble accessing these services. I mean, it's just being done because they've got nothing else to do. And I know that sounds kind of flippant, but really is what's happening. To make that worse, the more the bubble inflates, the more expensive everything gets. The more data centers that get funded, the more chips that are ordered,

• 1:33Ed Zitron?

  the more resources this takes and the more the RAM companies can crank up the prices and fuck over the customer. You see, AI GPUs use a special kind of memory, high bandwidth memory, that takes up more of the limited amount of fab space where SK Hynix, Micron and Samsung build their RAM. These are also the only three companies that really can build HBM. It's a triopoly, I guess you'd call it. And because Nvidia, Broadcom and other chip manufacturers quite literally can't build the GPUs that hyperscalers crave without them, their memory companies can charge effectively whatever they want. AI GPUs have become a massive amount of guaranteed revenue as the AI bubble inflates, leaving less fab space for the regular RAM, creating a supply shortage, or, put another

• 2:15Ed Zitron?

  way, a reason for the memory companies to bump up the prices aggressively. And yeah, they're allowed to do that. There's nobody to stop them. It's not like we have regulatory authorities who would bother. I should also add that Nvidia is one of the largest, if not the largest, HBM buyer in the world. Fifty-five to sixty-five percent of all high-bandwidth memory sales go to Nvidia. And this makes it actually a victim of this same inflation, because memory is getting more expensive across the board, even for high-bandwidth memory. Goldman Sachs reports that high-bandwidth memory is on course to increase by as much as ninety percent year-over-year in 2027. A linear increase in cost for every single Nvidia GPU and every single new one that one of the four hyperscalers oafs insists

• 2:56Ed Zitron?

  on preordering only serves to inflate a bubble for effectively no reason. They're not making a profit. Shit, they won't even talk about revenues. Maybe they're not really making that much outside of OpenAI and Anthropic's compute, like I've been saying. But good lord, good lord, good golly, Miss Molly, do these data centers take up a shit-ton of RAM? Analysts estimate that by the time that Nvidia ships its first next-generation Vera Rubin GPUs, it'll cost eighteen dollars and forty cents per gigabyte of high-bandwidth memory, sold two-hundred-and-eighty-eight gigabytes at a time. In fact, let me give you some scale as to how much RAM a data center actually needs, because it's an astonishing amount. The current generation GB300 racks, the vast seventy-two GPU servers that fill

• 3:38Ed Zitron?

  out modern data centers, and they have a CPU for every two GPUs, have about twenty-point-seven terabytes of high-bandwidth memory and seventeen terabytes of LPDDR5X RAM. And by the way, that's the RAM that you find in smartphones and mobile devices, which is also contributing to the supply chain shortages and driving up the price. Anyway, a gigawatt data center has about four-thousand-nine-hundred-and-thirty-three of these racks, working out to about one-point-nine-four billion dollars in high-bandwidth memory alone for a single data center, a number that's certain to increase across the board, even for current generation gear, because the price of high-bandwidth memory is going up. I haven't even included the many separate computers and different machines inside the

• 4:21Ed Zitron?

  data center that require RAM too. Entire racks of power management gear that themselves require RAM or HVAC systems alone, they're effectively servers unto themselves.

• 4:31Ed Zitron?

  And every data center is basically a giant warehouse of different RAM-dependent devices and machines, each controlled by other RAM-dependent machines, all to do one thing: AI that's yet to prove it even has a meaningful business model, or one that, I don't know, makes more money than it loses. And that high-bandwidth memory, by the way, is also not particularly useful for anything else, at least not at the scale it's being built, meaning that, once there's a noted CapEx pullback, somebody is going to be left with a bag, by which I mean, somebody is going to either have too much high-bandwidth memory, or gear that they can't sell with it, put on the side that won't be useful, or really sellable to someone else. And I must be clear how much more of this they are selling than usual.

• 5:11Ed Zitron?

  Back in 2022, they sold about 600 million gigabytes of high-bandwidth memory. So, sounds like a lot, until you realize they're expecting to sell 7 trillion or more of it in 2026. That's, that's a problem. That's a problem, because the more of it they sell, the more expensive it gets, but that's, they're gonna have years' worth of this crap, just either sitting around, or being attached to Nvidia GPUs that can't sell to anyone. And the longer it takes for CapEx to retract, the more expensive everything becomes as a result. The more GPUs that get sold, the more capacity that gets put towards high-bandwidth memory, and the more that Micron, SK Hynix, and Samsung can charge for it, which makes it more expensive to buy AI GPUs, which increases the amount that hyperscalers are spending

• 5:55Ed Zitron?

  on AI CapEx for effectively the same amount of gear. The longer that hyperscalers sustain this pace, the larger the return needs to be, and at this point, none of them have disclosed their actual AI revenues, which heavily suggests that there's yet to be even a single dollar of profit, and the actual quarterly revenues are pretty piss-poor. Yet, the more they commit, the more committed they have to be. Pulling back at this point will prove to the markets that all of the hyperscalers have committed far too much to too much capacity. Yet, not pulling back means that hyperscalers will continue to turn their free cash flows negative in pursuit of some indeterminate goal. It's a vicious cycle made worse by the fact that every spin of the CapEx wheel increases the price of just about every consumer electronic in the world, creating a market-wide inflation

• 6:39Ed Zitron?

  for what amounts to a speculative asset bubble, and will leave them sitting with a bunch of GPUs they don't really need now, and certainly won't in the future. What great works are these data centers in search of? What possible achievement can you point to at this time that remotely justifies the current expenditures, let alone the trillion-plus-more plan for the future?

• 7:00Ed Zitron?

  This is the vicious cycle of the AI bubble. The more data centers they build, the more expensive it becomes to build them because of the cartel of memory manufacturers that adjust the prices up at basically whatever rate they want to, and hyperscalers that have no idea what to do other than spending more money. RAM is in effectively everything, and thus, everything is going to get more expensive from here. Samsung, SK Hynix, and Micron have committed more than $2 trillion to building out more capacity, even though this bubble has been inflated based on building high-bandwidth memory that is being built at a scale beyond any reasonable level of industry demand. While that capacity, because you can build other things in the same RAM capacity, could theoretically be used for something else, the question is how they intend to pay for it, and how many of these actual commitments they've made with their own money,

• 7:44Ed Zitron?

  and indeed, how many of the commitments made to them by hyperscalers, by Nvidia, can be cancelled? And I expect we see a larger, more grotesque version of the massive write-offs and losses across memory manufacturers that we saw when the supply chain crisis ended in 2023, after the supply chain crisis that started in 2021. And when the time comes, know who to blame. Sam Altman, Dario Amade, Sundar Pichai, Andy Jesse, and Mark Zuckerberg. The men who created this entirely avoidable and horribly destructive situation. They all fucking suck, they could have done literally anything else, they could have built housing, they could have fixed their own products. But they chose to do this because they have no vision. These men are losers. I despise them for what they've done, and I hate them for what they've done to the computer.

• 8:28Ed Zitron?

  Thanks for listening, we'll be back next week with a special memory-focused episode with Steve Burke of Gamers Nexus. And I'll be back, of course, with another monologue. Cheers, my dears.

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