Apple raising a MacBook by $300 because a data centre in Iowa needs the same memory chip is the clearest illustration of how AI costs reach the person who never asked for AI. The consumer didn't sign up for a trillion-dollar infrastructure buildout. But the $300 on the sticker is their contribution to it, collected at the register and remitted to Micron's record-margin quarter through a commodity chip they've never thought about. For thirty years, electronics got cheaper every year. That promise just reversed, and the mechanism is a transfer of purchasing power from every household buying a laptop to the five companies buying every wafer.
The regressive part is what will eventually make this political. $300 is a rounding error for a tech worker earning $300K. It's a month of groceries for a family earning $45K. Both pay the same tax. The family can't opt out because the laptop without the price increase doesn't exist anymore. When someone in Washington figures out that the most tangible consumer impact of the AI boom isn't job loss or deepfakes but a $300 laptop surcharge funding someone else's data centre, the regulatory conversation changes overnight. Rockefeller's refineries were invisible to most Americans too, until a politician made them visible, and the memory oligopoly at 95% market share is a smaller cartel than Standard Oil ever was.
I agree that the truce is not likely to hold, but I also wonder what - at these prices - are the economics of building new fabs? When the chips were getting steadily cheaper the startup cost was a huge moat. But if the existing supply is consumed and there are still buyers with open wallets, how much of that moat remains?
Just for s&g what's the cost of a data center vs the cost of a fab plant? They're both massive capex expenditures and both have multi-year payoff horizons so it's not like just anyone can jump in. But given the hundreds of billions already pouring into capex would it make business sense to divert some of that?
New fabs are needed to meet the supply regardless -- we just don't yet have enough capacity to meet demand. At the EOD there will be margins someone in the system that gets squeezed from this memory surge -- it will probably cut a little bit into NVDA, fab makers, hardware, etc...but I don't think the risk is catastrophic anywhere. As has been the case for a while now, there are some supply-demand gyrations that lead to new companies and products being king of the hill but it's really just the AI ecosystem atop the hill, and everyone in that seems to be a winner.
Apple raising a MacBook by $300 because a data centre in Iowa needs the same memory chip is the clearest illustration of how AI costs reach the person who never asked for AI. The consumer didn't sign up for a trillion-dollar infrastructure buildout. But the $300 on the sticker is their contribution to it, collected at the register and remitted to Micron's record-margin quarter through a commodity chip they've never thought about. For thirty years, electronics got cheaper every year. That promise just reversed, and the mechanism is a transfer of purchasing power from every household buying a laptop to the five companies buying every wafer.
The regressive part is what will eventually make this political. $300 is a rounding error for a tech worker earning $300K. It's a month of groceries for a family earning $45K. Both pay the same tax. The family can't opt out because the laptop without the price increase doesn't exist anymore. When someone in Washington figures out that the most tangible consumer impact of the AI boom isn't job loss or deepfakes but a $300 laptop surcharge funding someone else's data centre, the regulatory conversation changes overnight. Rockefeller's refineries were invisible to most Americans too, until a politician made them visible, and the memory oligopoly at 95% market share is a smaller cartel than Standard Oil ever was.
I agree that the truce is not likely to hold, but I also wonder what - at these prices - are the economics of building new fabs? When the chips were getting steadily cheaper the startup cost was a huge moat. But if the existing supply is consumed and there are still buyers with open wallets, how much of that moat remains?
Just for s&g what's the cost of a data center vs the cost of a fab plant? They're both massive capex expenditures and both have multi-year payoff horizons so it's not like just anyone can jump in. But given the hundreds of billions already pouring into capex would it make business sense to divert some of that?
New fabs are needed to meet the supply regardless -- we just don't yet have enough capacity to meet demand. At the EOD there will be margins someone in the system that gets squeezed from this memory surge -- it will probably cut a little bit into NVDA, fab makers, hardware, etc...but I don't think the risk is catastrophic anywhere. As has been the case for a while now, there are some supply-demand gyrations that lead to new companies and products being king of the hill but it's really just the AI ecosystem atop the hill, and everyone in that seems to be a winner.