Comment by Kevin_Flynn
8 hours ago
My AI model queried itself just this morning to verify cluster status, and it says although DDR5 has been available since 2020, that 2+2 is still equal to 4 for those of us still running DDR4. V
In all seriousness, anyone remember when every library, business, government agency, and institution, etc was buying $20,000 cisco routers to "get on the internet" during the dot com boom/bust in the late 90's ?
Only to see them all end up on the surplus market, unused, for a couple hundred ?
We're in the AI boom/bust cycle, and its my understanding DRAM fab is specialized enough, that the supply is getting squeezed.
As for "doing it on purpose" ? It's being milked for all its worth. That's what companies do. They milk the market for what it will pay.
Also, for everyone who is trying to do local AI, on Xeon or EPYC platforms, memory bandwidth scales with module count, making them that much more in demand in terms of processing capacity / wafer area.
From what I've read, albeit from Reddit, they're not planning to sell or shelve those racks, they're planning to destroy them due to the fact it will flood the market. They have no intention of letting others have them.
Who is "they"? Certainly we have some concentration of consumers of this hardware. Are you saying they'd rather destroy the hardware to protect their supplier's market rather than allow the secondary market to function as normal? Maybe this is written into contracts? We're in a very sad state of affairs if that's the case.
There is such demand for the GPUs, for example, it seems that they can pick the winners and demand they abide with terms.
Aren't servers depreciating assets owned by the company and tracked on the balance sheet?
If so, on a liquidation event, I'd imagine they'd have to be sold to compensate the shareholders.
Idk yes its meant to depreciate and perhaps is from an accounting perspective but all my computer hardware has been rapidly appreciating… My 8x RTX Pro 6000 cluster has easily doubled in value in the last 12 months.
There are a lot of companies that will buy your servers and lease them back to you.
A company can either generate a small new revenue stream from on-selling old gear, or they can pay to destroy and dispose of it.
Which option is a profit-oriented, not-totally-profitable AI outfit going to choose?
Well, if they were bought on credit, and must be returned when you go insolvent to the company that makes the chips, whose market - and therefore stock - would collapse in value should the market be flooded with used equipment, and said company already dealt with a similar situation in the past few years... I think the answer is obvious.
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People seem confused here, but liquidation is very common. That's what private equity often does. It's also why debt collectors call non-stop, even if they are calling the wrong person (fuck you AI debt collectors!). They buy up the debt for pennies on the door and the original debt owner writes off a loss on their taxes. It's also the reason how I bought a Herman Miller for 40% retail.
It's very simple: some is better than none
I am not sure that it would be profitable to sell equipment that has been depreciated to 0$.
Clothing companies destroy unsold stock all the time.
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Lots of precedent for that: In the EU WEEE has incentivized companies to crush working electronics rather than selling them, because it is way less bureaucracy to hand something to a certified recycler than it is to legally sell the stuff. And once something has been entered into the WEEE system as waste it's pretty much impossible to legally recover it: the recyclers are literally not allowed to simply pick working equipment out of the pile and sell it. Technically WEEE is supposed to enable reuse, but it's way easier and less bureaucracy to just crush stuff. The necessary per-item paperwork, testing and certification (it has to actually work, broken/non-working equipment cannot be removed from the WEEE system, because it is waste, legally) and logistics required for reuse exceed the residual value anyway.
That's why used enterprise/industrial electronics are way less common on EU eBay compared to other places, despite the industrial base being so large (or used to being so large). You can actually see when WEEE came into force because very little used T&M equipment entered circulation in the EU after the early 2000s.
Another factor is lease agreements, where companies don't buy equipment and the lessor "recycles" (i.e. crushes) the equipment to avoid creating a used/second hand market as an additional benefit.
The liquidators will squeeze every penny out. All that ram will hit someone who can take the chips out and repackage for consumers.
Huh. This is a crime against humanity. The planet is burning.
Eh. Destroying the racks is a waste of resources. Most of the metal components will be recycled. The boards scrapped for gold. The net positive is that many the data centers would shut down leading to a better balance overall.
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there's a big difference between now and then. we built up capacity. dark fiber. and couldn't use until we got broadband. In general. ai capacity is being used right now today.
> In general. ai capacity is being used right now today.
Not according to this article[1], which says:
"I believe we are now in an inevitable overbuild situation, one with no neat, tidy Dot-Com Bubble-style exit story. Demand for NVIDIA GPUs — and those from Broadcom, AMD and other semiconductor companies — is driven by speculative capital believing that the AI industry will become magnitudes larger than it is today, largely driven by the fact that everybody believes there’s far more demand for compute capacity than actually exists. ... NVIDIA has created a remarkable illusion perpetuated by the media — that GPU sales are a direct measurement of the actual demand for AI compute, rather than a measurement of how a few companies are willing to invest in an idea two years in advance, using circular financing as a means of creating the sense that you must buy these GPUs now, or you’ll miss out on the future. ... At the very least, hyperscalers are going to be burdened with brutal depreciation charges or onerous write-offs for years to come, whether their capacity turns into revenue or not. ... I don’t see how 90%+ of NVIDIA’s sales ever end up generating a single dollar of revenue, and considering the amount of project financing-backed data center debt deals, there’s very little that exists to protect investors if AI compute demand never arrives."
[1] - https://www.wheresyoured.at/wherere-all-the-ai-chips/
That's Ed Zitron, and his calls on AI matters routinely get outperformed by that of a broken clock.
The man saw the market demand for saying "AI bubble is going to pop and AI tech is going to wither away and die", and went to meet it on the supply side - truth be damned.
So far, AI companies still keep getting bottlenecked on compute, AI utilization increases - driven by, among other things, increased price-performance of AI making it viable in more and more roles. And the demand for both AI inference and AI hardware in general shows no signs of stopping.
In 5 years from now every device. Even your oven or washing machine has somekind of local LLM running for sensor reading and smart decision models. I can already think of quite some useful use cases for those devices. So I do believe that AI becomes magnitudes bigger than today. It's a logical step in our digital journey.
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That’s not exactly true, a lot of GPUs are sitting in warehouses because they are lacking prerequisites to being installed, in some cases this is even just power.
https://www.tomshardware.com/tech-industry/data-centers-in-n...
I don’t think the article you cite supports your point with confidence you convey. Yes other dimensions can complicate deployment, but incentives to work around those issues are high, given the cost of GPUs
That’s not the same. Those GPUs are allocated to real projects with real demand. If they could turn them on today they would do it and they would have customers.
It’s not the same as dark fiber capacity being overbuilt for demand that wasn’t there yet.
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Yes. I have 3 GPUs in the other room, sitting in boxes, waiting to be powered on, because I dont have the electrical circuit installed in the room yet.
I can directly confirm this fact, and I'm just some random dude out here in suburbia, who can only imagine what the Indiana Jones warehouse of glowing GPUs looks like in a data center.
We're all salivating over this imagined future where an AI toilet seat greets us every morning.
Who here has already asked AI how to make your own DRAM ? I know you have. Thats a sign of peak interest in a subject or market.
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… and cooling
That’s one big difference. The other big difference is that capital back then was mainly spent by startups with no or little traction.
Today, the "old" corporations like google, meta, amazon are also spending a lot of money.
This does not seem to be the case. The very first VeraRubin NVL72 systems are barely installed and won't be running real workloads until beginning of '27. Colossus II appears to be the largest user of Blackwell Ultra NVL72s and those are also only recently on-line in September of this year with the remaining 3/4 of them not until end of the year. The delays in datacenter deployment are very long. Even their GB200s didn't come on-line until January of '26. Hopper H100/200s still dominate.
The other hyperscalers are even further delayed. CoreWeave has some VeraRubin, but not in volume (as I understand).
https://en.wikipedia.org/wiki/Colossus_(data_center)
https://www.moduledge.com/blog/nvidia-hopper
We’re doing a similar thing now too, building tons of extra power capacity and links to data centers.
After the crash no one will need to build a new data center for 20 years, and there will be plentiful power connections
> ai capacity is being used right now today.
A lot of its current use is just basic questions that could be handled by local llms just as well, yet they are being processed on GB200s on the other side of the world.
I'm here for the scraps.
> As for "doing it on purpose" ? It's being milked for all its worth. That's what companies do. They milk the market for what it will pay.
It’s what everyone does, from company to individual. When you sell your used car or list your house, you price it according to what the market will pay. When companies sell a product, they list it for what the market will pay.
The conspiracy theories and accusations of collusion were flying everywhere until CXMT came online. It felt like every comment section and headline was predicting that CXMT’s arrival was going to crush the cartel and smash the “price fixing” when a new competitor arrived.
Then CXMT memory arrived at nearly the same price as everything else because, to the surprise of nobody with basic economic understanding, they were selling their products at market rate too.
The high price is being driven by demand combined with a supply chain that takes years to increase output. Just prior to this demand explosion, RAM and SSDs were so cheap that producers couldn’t justify building out more capacity. It would have been a bad choice at the time unless they had a crystal ball that could have predicted the future.
For what it’s worth, I’m willing to buy as much RAM from everyone else at 50% of what these companies are selling it at. If everyone works together, we can cut the market price by selling it to me. I will provide the much needed capital in dollars to shift the price and others can provide the RAM to me.
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.
It's not really clear to me how your comment functions as a response to the parent.
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.
The important question isn’t so much “are people trying to get the best deal possible for themselves?” but rather “how well is this market functioning?” Or phrased another way, “how competitive is this market?”
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.
> 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.
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The reason why the memory cartel fucked everyone over isn't exactly the pricing. It's the supply. It's that the established manufacturers all agreed on "AI demand is a fluke, we wouldn't rush to online new manufacturing capacity" back in 2022.
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.
> The reason why the memory cartel fucked everyone over isn't exactly the pricing
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"
Plus it's the same ram cartel players since the early 2000s.
>My AI model queried itself just this morning to verify cluster status
>Only to see them all end up on the surplus market, unused, for a couple hundred ?
You realize to people that aren't you, this looks like holding two competing ideas at once.
And the comparison makes zero logic. Your library, government, employer are on the internet, who gives a fuck what dump their first modem went into
That's a witty joke, we used to make them all the time ...
1/ Not apparent, there are lots of guys on hn that have real AI setups costing > $50K
Lots of business owners here too that build their own clusters
2/ If it's a boom and bust cycle as he said, where's the bust? It's not coming. Humanity will use exponentially more memory and computing, as we've seen. That's not going away.
Let's have interesting conversations about the next steps for memory, is it quantum? what's up next? is humanity really beholden to a monopoly of private chip makers
> As for "doing it on purpose" ? It's being milked for all its worth. That's what companies do. They milk the market for what it will pay.
In supply constrained markets the bidders set the price floor, not the manufacturer. A manufacturer produces a supply; they tender the supply for bids. The highest bidder gets the opportunity to purchase the supply. Everyone else has to wait for the next bid, the waiting is their opportunity cost, and is priced into their bid.
That's what we mean when we say "milking". Just because you can explain something in economic terms does not make it justifiable.
You have described the market milking process very accurately.
Theres machine learning algorithms in the mix, and it all works perfectly smoothly, until it doesn't.
Smoothly here, being defined as the markets emotional feelings about it all, not, the price went up.
The price went up because it could, as you pointed out.
The price went up because demand went up. If you want incentives to build more infrastructure to produce more supply so the price can come down, it has to first go up.
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To add onto this: it is generally not possible for suppliers to sell below market rate. If DDR5 is going for $400/16GB, and you want to sell 16GB for $200, people are going to buy your cheap RAM until you run out and resell it for more money. This is called arbitrage, and it's the market rewarding others for being greedy where you weren't. The only way to make the price go down is to make the market's price go down: produce so much supply that you extinguish all of the arbitrage-driven demand.
There are some wrinkles to this. If CXMT's RAM was somehow inferior, then the market could sustain two different prices for two different products. But it's difficult to separate the market like this without just making unusable trash. The one separation we do have - DDR5 vs HBM - works against the consumer's favor. One layer down in the supply chain, RAM manufacturers have to buy silicon wafers to etch circuits into, and HBM takes up treble more wafer space than DDR5 per gigabyte. In fact, this is specifically the scarcity that allowed Sam Altman to engineer a RAM crisis, by buying up a bunch of wafer supply that he could then redirect to more AI-optimized HBM.
We can also infer from all of this that CXMT - while producing lots of memory - does not have the scale necessary to actually quench the inflated demand. Either because their yields are shit, or because China wants to run a business and made the same calculation as the other RAM producers that the AI bubble would pop before they could get additional equipment online to service demand.
Counterpoint: Arbitrageurs cannot outsupply the OEM, and with enough supply, whatever delta the arbitrage itself has will be recursively arbitraged in turn until a stable low price is reached, cf. Chinese solar industry dominance, and keep an eye out for Chinese EVs.
> EPYC platforms, memory bandwidth scales with module count, making them that much more in demand in terms of processing capacity / wafer area.
Why is so hard to get self-hosted bare metal which uses all of the modules? Most server providers go for 1 stick and call it a day....
ffs
Routers don't do productive work.
This boom is only superficially like the dot com bubble.
There are absolutely parallels.
But, a GPU that can help me write emails, code, articles, etc. has intrinsic value that a Cisco router simply didn't provide.
I don't believe GPUs are a new asset as Jensen Huang claims. (His take seems very bubble-ish.) But, I feel these elevated prices are going to last until production catches up.
If you're growing onions in the backyard, you don't need a router.
If you're writing emails, you're gonna need to send them through a router or two before someone reads them.
> I don't believe GPUs are a new asset as Jensen Huang claims.
He sells GPU's, so taken in context, he's promoting the financing of GPU's, by anyone who is listening to his sales pitch. He travels in CEO circles, so, he's talking to other CEO's, and the banking industry.
The phrasing of it also directly pushes back against the articles accusing the AI industry of circularly financing itself to inflate everyones balance sheet.
And the other thing this idea of it being an asset that you invest in, like a house presumably, is that it primes all of us for 2 future realities: price increases and minimal performance gains ( "its useful for longer so finance it" ).
As to economic value proposition to any individual or group, it boils down to how they are going to use it to recoup the expense.
Don't just take the sales guys word for it, ever.
There have been many videos lately, on whats happening in the automotive market. The industry has been adding more and more tech, to the point where its now financially extractive via mandatory dealer interaction aka fees, and people are becomming fed up with it all, wanting something simpler for less money.
Translate this to the big fat GPU card industry, and how long is it before AMD/Intel add just enough AI ops into every CPU that noone cares anymore and they start asking themselves "Why am I buying 96GB of RAM and a GPU, and 96GB RAM and a CPU ? I'm buying ram twice ! It's a conspiracy !"
Unified architectures seem to be inevitable, GPU's would no longer need seperate ram, then shrinkflation is gonna hit your video card, and you're gonna pay GPU+RAM prices for just a GPU. The upside to this is that you could fit more GPU's in your box and they won't need 2.5 slots each. For now, they are hoping the DGX Spark type boxes fill the market demand, and allow them to sell higher priced products. Unified architectures would dent demand for those.
Just my 2 cents on it all. Enjoy the ride.
> If you're growing onions in the backyard, you don't need a router. If you're writing emails, you're gonna need to send them through a router or two before someone reads
That’s what the cable company wants you to believe. We sent their damned boxes back. They wanted us renting a modem that never hangs up, then buying a router just so our own computers could talk to each other. Mine used to call yours directly over the telephone!
Now there’s a computer inside the modem, another pretending to be a router, and a mess of switches, gateways, and subnet masks to do what two modems and a telephone number used to accomplish.
They took the party line, put it on a television channel, called it broadband, and convinced everybody to rent the equipment.
In my day, when somebody tried to break into your computer, you could hear the bastard dialing. And when you were done with the Internet, you hung up. Now they want you connected twenty-four hours a day.
Just wait until somebody breaks into your television through that cable. You’ll wish you’d kept your rabbit ears.
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Without routers, your email isn't going anywhere, it doesn't matter who wrote it.
>Routers don't do productive work.
I'm sorry, what?! Communications is a valuable thing. How is all that AI slop going to hit the Internet if there's no routers?