Comment by Aurornis
2 months ago
> It's that AI companies are vacuuming up every DRAM chip on the planet and the rest of us get to pay the tax.
DRAM is priced based on supply and demand, like every other market.
When demand goes up, the price goes up for everyone. It’s not a “tax” on the rest of us in any sense. There’s just a lot of demand everywhere.
> That's not normal market dynamics.
This is actually a textbook example of markets functioning in response to a demand shock where supply cannot be increased rapidly.
I do find it interesting that so many people think “market rate” means the opposite of what economics teaches, and that prices should stay stable and not change much when the economic conditions change.
I also find it interesting to read all of the “we shouldn’t let them…” takes in response to this situation. The DRAM market is international. Trying to restrict it in one country would just see the data centers get built in another country.
Saying this is just the market...is like saying housing is a free market after hedge funds buy your entire neighborhood...
But... They're not wrong. That IS the market. Unrestricted, gloriously free market with its historically predictable outcomes - yay!
That's not where the interesting discussion is. The interesting discussion is with the notion that free unregulated markets are universally good and will naturally lead to positive outcomes because... I don't know, I'm personally not religious, but somebody here will help me :-).
Commodities used to be proper free markets. Many suppliers and many buyers of a product that was the same regardless of the supplier.
This lead to low prices and/or differentiation with new products.
Most of these markets were too good, so in general we now have a few big companies buying up the lion share of the supply so they can set the price regardless. For example soy, just to name one
Sorry, when you say "gloriously free market", do you mean whatever it takes EU, helicopter money (or, rewinding a decade, Greenspan put) US, or factory of the world China? :)
My point is that it's not a real market economy if the risk premium -- and in China's case, the exchange rate -- is rigged. And it has been, since the 90s.
EDIT: For clarity, I'm agreeing with you, since you were being facetious.
2 replies →
> That's not where the interesting discussion is. The interesting discussion is with the notion that free unregulated markets are universally good and will naturally lead to positive outcomes because...
The textbook desirable outcome is that competitive markets minimize suppliers'surplus which is good for consumers.
Not that this doesn't mean unregulated markets. Monopolies and oligopolies acting like a monopoly are textbook examples of pathological markets where suppliers can maximize their surplus.
I think pretty much everyone would agree that the current situation is a failure of regulation not over regulation. Regulator and legislation have been constantly weakened in the name of international competitiveness since Reagan.
Where are these unregulated markets? Are you trading with your neighbor? If so, good, the more of that the better.
10 replies →
But these markets are only "free" if you ignore the net $5.5 trillion the Fed has printed post GFC.
https://fred.stlouisfed.org/series/WALCL
2 replies →
What they probably mean is that it is not a fair market, that there is no balance in purchasing power, pushing small scale buyers away while supply slowly catches up (or doesn't)
2 replies →
People love to say that but they own a very small percentage of housing in reality. What’s driving housing costs is also supply and demand. Especially supply, since we’re not allowed to build any houses in most places people want to live.
Prices are decided at the margins. Having PE and REITs at every single table, even if their actual ownership is small as a %, makes huge differences.
3 replies →
Which doesn't sound like a free market to me. Capping production to keep asset price high is one of the most straightforward default examples of market-distorting interventions there is.
> not allowed to build any houses in most places people want to live
Or to convert them into apartment buildings
Read your response again. You are reinforcing my argument in case you did not notice...
Hedge funds don’t have as high of institutional ownership as you assume. It’s actually pretty small.
That said, nothing about the situation you described is at odds with “free market”. You’re describing the operation of a free market.
I think a lot of people want “free market” to mean the opposite: A highly restricted market where they are protected from any supply and demand inputs from anyone else. They just want cheap things and don’t want to compete with anyone.
There are two sides to a free market, though. In your example where a hedge fund comes in and buys your entire neighborhood, they would have to do so by outbidding everyone. This drives up the price. If it’s an economically irrational move you’d be smart to sell your house to them at an inflated rate, too! Then move back in when the prices crash down.
Which neighborhoods are now entirely owned by hedge funds?
I should point out the relevance of my argument, is completely independent from the fact the reply to this questions of yours, is higher than zero.
So dont see this reply as a justification. Just as a note that you failed to do basic diligence on distortions that are well known. And as I said, that are not relevant to the analogy.
"When Wall Street Is Your Landlord" - https://www.theatlantic.com/technology/archive/2019/02/singl...
"In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012"
4 replies →
Are there regulatory barriers to entering the DRAM market like there are in housing?
China blocked from buying ASML machines?
correct, both of those things are examples of free markets
Adam Smith had already clarified free market refers to a market free from all forms of economic privilege, monopolies and artificial scarcities.
You are confusing market outcome with market structure.
4 replies →
Incumbent owners preventing the construction of more supply to maintain their own property values is not "free market". This is very basic stuff
> When demand goes up, the price goes up for everyone. It’s not a “tax” on the rest of us in any sense. There’s just a lot of demand everywhere.
> This is actually a textbook example of markets functioning in response to a demand shock where supply cannot be increased rapidly.
You act like it's a competitive market. It's not the case. It's an oligopoly with an extremely inelastic supply side.
The market is already completely broken and ineffective due to concentration and export controls. The actual response to a major demand shock should be investments to increase capacities but it's currently extremely limited because suppliers want to protect their margins and fear the market contracting again.
> It’s not a “tax” on the rest of us in any sense. There’s just a lot of demand everywhere.
Curious on whether you will still hold your stance if OpenAI gets a taxpayer bailout. Even disregarding a bailout, they are already lobbying hard for tax credit expansion.
A government bailout of OpenAI would be a regressive redistribution of wealth to some of the least needy people in all of society, which is a horrendously poor use of government funds. But that has no bearing on the fact that calling high DRAM prices induced by high demand a “tax” stretches the meaning of the word beyond all recognition.
There are many horrible things in the world and we don’t need to label them all as a “tax.” If we use words in an imprecise way, it obfuscates the truth.
Please note that OpenAI Partners and suppliers (Oracle, CoreWeave, SoftBank-linked entities) have taken on significant debt to fund infrastructure for OpenAI - around ~$100 billion reported in late 2025 alone.
Projections show $14-20 billion in losses for OpenAI expected just in 2026.
The chances that someone is not going to ask for a debt write-off approaches zero as the years go. OpenAI already began testing the waters since late last year. Senator Warren has already raised alarms about potential indirect taxpayer exposure when the "AI bubble" bursts.
When that happens - and it is all but guaranteed to happen - it will amount to a horrendous tax, rendering everything you’ve said about 'imprecise words obfuscating the truth' complete hogwash.
Most markets don't have three purchasers trying to corner the entire supply of one product.
I guess we’d call this oligopsony?
The monopsony (single buyer of a good) equivalent of an oligopoly?
Phew, it is a word, but not a highly studied one!
https://en.wikipedia.org/wiki/Oligopsony
Economic history is full of examples of demand shocks. This is not some unique situation that has never occurred before.
This is actually a clean commodity price spike because it’s specifically not for market manipulation or financial engineering. It’s because demand for this product really did explode overnight.
> This is actually a clean commodity price spike because it’s specifically not for market manipulation or financial engineering. It’s because demand for this product really did explode overnight.
Based on how the same 3 billion has been circiling between Anthropic, OpenAI, Nvidia, Google, Microsoft, Amazon, and a few other companies... I really doubt that this is the case, to be honest.
1 reply →
You're being exceedingly pedantic over the use of the colloquialism "DRAM tax" but then you allow "demand shocks". So yeah, everyone's shocked.
Weird hill..
1 reply →
It is manipulation when wafers are purchased in order to not process further a la OpenAI.
By 3 buyers who have no known plan to finance the purchase orders they have made.
Economic history is also full of examples of bubble bursts.
> This is actually a textbook example of markets functioning in response to a demand shock where supply cannot be increased rapidly.
The problem is that demand is being propped up by speculative capital. The AI companies are a bubble that is suffocating productive parts of the market with the hording of capital which they're now using to also hoard hardware. All this without making money for data centres that aren't build yet, for a handwavy promise that an AGI will magically solve all the worlds problems.
This is not normal, and it is not good for the broader economy.
Yeah the dudes argument is bunk when we remember that openAI bought CAPACITY and not actual product. The market is also heavily manipulated by the big 3 players in the market.
OpenAI brazenly used their market position to create artificial scarcity. That's not normal market behavior. That's manipulation. And now we all suffer.
[dead]
> Trying to restrict it in one country would just see the data centers get built in another country.
I'm surprised this isn't already what's being done. Inference doesn't require super low latency with the client, and the population's support of AI (and especially data centers for it) is waning quickly. This feels like another ideal use case for outsourcing the stuff Americans don't want to see to somewhere that it'll be someone else's problem.
> Trying to restrict it in one country would just see the data centers get built in another country.
Sounds like not stressing the electricity infrastructure in Spain, to run inference for Facebook North American posts, should be seen as a positive...
Factory capacity does not follow market dynamics easily
I think the usefulness of market dynamics is their ability to follow things like factory capacity, which are themselves hard to follow, not the other way around.
For things that aren't inherently limited in production it is supposed to work both ways..
A key element is that China still acts as a block.. So Chinese firms have lost a big opportunity by not making DDR4 yet aren't ready with DDR5. When they are ready it will probably tank the market which is less profitable than selling at high prices with actual availability of something the whole time.
Can't agree more. We can also predict with some confidence that in a year or two, supply would have adjusted and ram will be cheaper in the long run. We benefit from the expanded demand even if the fact that it first lands as a shock is disruptive to prices.
GPU prices went through the roof for crypto and then the pandemic and never really recovered to pre-pandemic prices before once again spiking because of AI demand. So where's the increased supply of Nvidia cards to account for all the continued demand? And why haven't RAM manufacturers announced plans for increased production (instead of pulling out of the consumer market altogether)?
The past 6 years of GPU pricing (the 5080 launched at $1000, currently $1500-1800 at Microcenter) don't exactly fill me with confidence that RAM manufacturers will increase supply to meet demand and bring down prices again.
If the last five or so years are to go by, we'll just have another pricing shock by then. So yay.
The problem is that OpenAI has cornered the market. Maybe they haven't crossed the legal line or more to the point no one in this corrupt and incompetent administration is going to prosecute them, but buying up 40% of a market which hasn't got any additional capacity is cornering by any measure.
So yes, this is not a normal market. Your claim of a functioning market is the same as saying my laptop, having lit on fire, is a functioning computer after having 10,000 volts applied across it.
> DRAM is priced based on supply and demand, like every other market.
Please don't explain it away like that - you are referring to the theoretical "ideal" market where a bunch of small companies compete with low margins to the benefit of the wider customer base. This is not what is happening. We have a couple of intrinsically worthless, LLM-whale companies, working literally to swallow and entshittify literally everything in their weird transhumanist/accelerationist/weirdo way. To add to the insult, the whole creation of artificial scarcity is almost a political construct, paid for with "monopoly-the-game-money" that these companies DO NOT EARN but instead BORROW based on vague and dishonest promises of achieving a "Country of PhDs in a datacenter"/"Pocket PhDs"/"AGI by 2025" (oops, now apparently by 2028 according to the OpenAI CEO). In their weird vision, as humans we should be merely cattle to be managed, not independent spirits with interest and aspirations. That ghoul Karpathy speaks about "ghost in the machine", overlooking the magnificence of the already existing "ghost in the machine" in the form of human beings. We should not have to swallow the increasingly crappier future these folks are insisting on pushing on all of us.
In many countries, its illegal to manipulate prices in bulk.
What makes it manipulation? If 5 companies want to buy a quadrilion ram chips to build datacenters, why is this manipulation moreso than a million companies each wanting to buy 100 ram chips?
I think the problem is that both the buyers and producers are too large. Governments should not allow companies to become this big, because... <gestures broadly at everything>. If there were a thousand ram makers and a thousand datacenter builders, this particular problem would not exist.
But you can't just label any price evolution you dislike as "price manipulation".
>What makes it manipulation?
Their size and the effect on the market they have
>×If 5 companies want to buy a quadrilion ram chips to build datacenters, why is this manipulation moreso than a million companies each wanting to buy 100 ram chips?
Because they are 5 companies, especially when it can be shown they work in unison (formed a cartel)
It's certainly price manipulation, but not likely to be intended price manipulation. Your arguments are flawed but you have reached the right conclusion.
This is one of the many flaws of badly regulated markets.
(There are no free markets, and there is never perfect information, and people often behave remarkably irrationally for many reasons.)
1 reply →
https://en.wikipedia.org/wiki/Phoebus_cartel
---
It's interesting how little you've examined similar cases. And you some how assume good faith in their behaviors.
AI demand is subsidized by the bubble. Those operators buying the RAM are not paying using money that exists. Market economics are not working here.
"it happened therefore it's normal"