Comment by bluGill
7 days ago
That is the question - will those ai companies buy the contracts
edit: actually it is worse - who else isn't buying contracts - if they build new capactity on contracts and ai collapses the existing users will take up the contracts but the old capacticy is unused.
If they build the new fabs and AI collapses then they still got all the AI companies' money because they prepaid. The current market price of chips is then going to crash, but that's what happens when AI collapses regardless. Might as well sell them five years worth of chips rather than two years worth of chips before the cash cow dries up.
Meanwhile, the fab companies want to think about what happens if AI collapses, but the AI companies don't. What do they care if they get screwed on a contract the day after they go bankrupt regardless? So offer them a contract where they get screwed if they go bankrupt, e.g. prohibit them from using any of the hardware for anything but AI for five years. Then the hardware is locked into AI stuff regardless of whether AI dries up and you can still go sell the rest of the chips that aren't to PC OEMs etc.
I don’t think the math maths. The pay back for a new plant is minimum 7 years and that is not accounting for the time to build it. I suspect nobody is buying a 10 year forward purchase agreement.
The bankruptcy courst are likely to see that as an unreasonable contract terms and call it void. See a lawyer for what they really can do of course but contract terms have to be reasonable.