alt Hacker NewsThere's clearly easy/irrational money distorting the markets here. Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay. But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies.
Eventually the music will stop when the easy money runs out and we'll see how much people are truly willing to pay for AI.
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No it’s not an easy fix. Manufacturers don’t have a good pulse on long term demand. The he capex to spin up a new manufacturing plant is significant. Especially with the recency of Covid where some folks did get caught with their pants down and over invested during the huge demand boom.
I don’t quite follow the narrative like yours about nation states and investors. There is certainly an industrial bubble going on and lots of startups getting massive amounts of capital but I here is a strong signal that a good part of this demand is here to stay.
This will be one of those scenarios where some companies will look brilliant and others foolish.
This is what a business cycle looks like.
Seeing the first mover succeed, every Tom, Dick and Harry wants to emulate. It distorts the price because people would pay premium for everything. Then there is surplus supply and no takers. People are caught with their pants down and things go for cheap.
This repeats ad nauseum. Whether it was building ISPs during early 2000s or the abundance of streaming service where every media company wanted one. Just because the corporate overlord doesn't want to look foolish for not following a trend.
It's hard to increase long-run production capacity for what seems to be clearly a short-term spike in datacenter buildout. Even if AI itself is not much of a bubble, at some point spending on new AI facilities has to subside.
There's clearly easy/irrational money distorting the markets here.
AI will cause shortages in everything from GPUs to CPUs, RAM, storage, networking, fiber, etc because of real demand. The physical world can't keep up with AI progress. Hence, shortages.
AI simply increases computer use by magnitudes. Now you can suddenly use Seedance 2.0 to make CGI that would have cost tens of millions 5 years ago for $5.[0] Everyone is going to need more disk space to store all those video files. Someone in their basement can make a full length movie limited only by imagination. The output quality keeps getting better quicker.
AI agents also drastically increase storage demands. Imagine financial companies using AI agents to search, scrape, organize data on stocks that they wouldn't have been able to do prior. Suddenly, disk storage and CPUs are in high demand for tasks like these.
I think the demand for computer hardware and networking gear is real and is only the beginning.
As someone who is into AI, hardware, and investing, I've been investing in physical businesses based on the above hypothesis. The only durable moats will be compute, energy, and data.
AI is going to be what fiber was to the dotcom bubble. Someone spend a lot of money on a lot of infrastructure, some of which is going to be incredibly useful, but sold for much less than it cost to build. Hardware just depreciates much much faster than fiber networks.
> Normally this wouldn't be a problem: prices would go up, supply would eventually increase and everybody would be okay.
This sounds like economic dogma based on pointing at some future equilibrium.
I like the saying that goes something like "life is what is happens when you are waiting for the future". In the same way, it seems to me that equilibrium is increasingly less common for many of us.
Markets are dynamic systems, and there are sub-fields of economics that recognize this. The message doesn't always get out unfortunately.
> But with AI being massively subsidized by nation-states and investors, there's no price that is too high for these supplies.
This feels like more dogma: find a convenient scape-goat: governments.
Time to wake up to what history has shown us! Markets naturally reflect boom and bust cycles, irrationality of people, and various other market failures. None of these are news to competent economists, by the way. Be careful from whence you get your economic "analysis".
Higher price encourages more supply. Typically when you see a acute shortage, its quickly followed by a glut as supply starts coming online in an over correction.
I think AI companies are involving these other industries so when the money runs out they will claim the whole thing is too big too fail.
Earlier gamers got punished by crypto and now they are being punished by AI.
The quote was from the screenwriter he never said it.
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.