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.

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 :-).

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

That's one form of trading with your neighbor.

This is actually also how global diplomacy works. Either have big guns or big friends.

For markets to exist, property rights also need to be respected.

For markets to exist they indeed need to be regulated and when they aren't you get something other than a market, you get thuggery.

I'm not convinced that the system they want to build would actually protect people, though.

Edit: upvoted because it's true

https://fred.stlouisfed.org/series/WALCL

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.

The right way of looking at it is, there was tiny little interlude of something vaguely approaching the free market -- back when Volcker was in charge.

Trivially, I would assume proponents of "free market" and "fair market" are a tiny if not zero Venn diagram, and that terms are at least somewhat opposing, but will withhold my judgement :-).

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.

They are responding to the market. If they overbuy then they will lose money and have to sell at a loss, at which point you could snap up some good deals.

The funds themselves say in their financials that they view housing as profitable because of the various restrictions on supply in every desirable city. They explicitly say that if those restrictions were lifted they would not be able to make money in that business and they would exit.

Or to convert them into apartment buildings

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.

You are confusing market outcome with market structure.

Nobody is making an artificial scarcity. They’re producing as much as they can.

You can buy the exact same DRAM that the data centers are bidding on.

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"

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.

There are many horrible things in the world and we don’t need to label them all as a “tax.” Words have meanings and if we use them in an imprecise way, it obfuscates the truth.

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.

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.

Sounds like not stressing the electricity infrastructure in Spain, to run inference for Facebook North American posts, should be seen as a positive...

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.

OpenAI brazenly used their market position to create artificial scarcity. That's not normal market behavior. That's manipulation. And now we all suffer.

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.

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.

> 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.

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.

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".

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.)

Remember when FAANG was caught red handed manipulated hiring to depress salaries?

Just seems like a lot of astroturf-ish behavior ignoring real world happenings: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...

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 interesting how little you've examined similar cases. And you some how assume good faith in their behaviors.

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

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.

Weird hill..

https://en.wikipedia.org/wiki/Demand_shock

Tax is also an economic term, which is not what’s happening. Calling it a “tax on consumers” doesn’t make sense because any data centers buying RAM right now are also buying from the same global market.

If commenters just want to be outraged and throw words around then use whatever words you want, I suppose.

Economic history is also full of examples of bubble bursts.

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.

We might also have our aquifers depleted and our electricity prices skyrocket. But at least we see really great benefits, such as being able to script some side-project while unemployed due to AI.

Oh it's this thoroughly debunked talking point again.

https://andymasley.substack.com/p/the-ai-water-issue-is-fake

[1] - Cooling towers reject heat through evaporation, which uses water, not just recirculates it. Evaporated water is lost to the atmosphere and must be replaced with "make-up" water. As a result, recirculating cooling loops still require new water input to make up evaporation and blowdown losses.

[1] - https://en.wikipedia.org/wiki/Cooling_tower

What if there were a cooler that somehow didn't evaporate water, you might even call it a "dry cooler" - that would be a sweet invention. This might even be required in areas where adiabatic cooling isn't effective (humid climates)!

I like the idea of a giant heat pump into the ground, but heat exchangers are expensive and so is digging.

- Intel Core i7-6700 - 32 GB - 2 x 480 GB Datacenter SSD - 1 GB/s - 20 TB traffic

Their VPS are even cheaper. And you can run a lot on this.

If you wanted to run same workloads on Aws it would cost you few hundred euro a month.

I see a silver lining to all this. At least maybe the silly "throw more horizontal scaling at it" will stop being a default response to all performance problems and people that are able to squeeze more processing out of the same hardware will be sought after again.

That CPU is ancient, though. Over a decade old. That DRAM is 2-channel DDR3.

This could be a good deal for someone, but entrusting your startup’s operations to a 10 year old slow computer in Germany instead of using EKS would be an extremely short sighted move. A startup should be developing software and shipping it quickly to validate the market, not pinching pennies to save the equivalent of a couple hours of developer salary.

Coincidentally so are the t3 / t3a instances on AWS that everyone loves to use especially for dev/staging environments

Not necessarily obvious failures, but subtle errors, memory problems (like this case without an ECC capable CPU) and little instabilities.

With cloud instances I can migrate to a new instance with a couple clicks if I want.

Trying to save a couple hundred euros per month on hosting costs needs to be balanced against the risks and extra developer time.

For personal projects these old instances can be an excellent deal though.

But then I remembered that what AWS gives you is the same generation of CPU, just obfuscated.

GCP Also obfuscates it, but not as much: https://docs.cloud.google.com/compute/docs/general-purpose-m...

(note: skylake is 10 years old)

6700 should be DDR4 unless they're using some weird-ass setup.

Also, if you don't want to provision software systems, you probably shouldn't use Kubernetes at all. Both this and compute are niche businesses and neither would rent a budget server anyway.

https://cloud.google.com/products/calculator?dl=CjhDaVEyWWpJ...

The CPU is the same generation; https://docs.cloud.google.com/compute/docs/general-purpose-m...

Depending on workload, this old CPU might be as slow as a 2 thread or even 1 thread current gen server.

Because those big systems are optimized for power efficiency. That Epyc is ~2.4W/core compared to ~16W/core for the old i7. It has a lower base clock and is Zen5c. If we cut the 8-core Ryzen 9850X3D's score in half, 4 Ryzen cores from the same generation but with a higher base clock and six times the L3 cache per core would be 20942. But it's also back up to 15W/core. The Epyc still has better performance per watt.

The newer cores are significantly more efficient. That doesn't mean they're unconditionally faster independent of all other variables.

I think you’re talking about something else. The comment above was about a machine that didn’t have 10TB of storage, 320GB RAM, or unlimited bandwidth.

If you find 320GB of RAM and unlimited bandwidth for 40 Euro monthly then send it over!

This is a rather baffling opinion to have. All cloud providers charge far more for a virtualized instance running on God knows what hardware. You are faced with a deal where you can run your software on bare metal, and you complain about... About what exactly?

Not too bad considering.

2) why could they not just up the prices for new deployments, like they did with their dedicated servers? I think that would be fairer to existing customers

If you have a company, I can recommend leaseweb for cheap hosting. I host my personal stuff like my email and my ente.io instance there. They are cheaper than Hetzner (already before the new price increase) if you don't need managed k8s.

The cheapest Kimsufi dedicated server with 32GB ram is $11.10/mo.

That's exactly normal market dynamics during acute shortage. Remember 2020 when filtering face masks went up in price 10-100x?

So I think that the victims are all the computer users of the entire world, with the exception of a negligible number of humans tied to the AI companies. Moreover, the US victims appear to be hit by the price hikes even more than in other countries, at least for now.

It is, in fact, normal market dynamics.

It doesn't matter how many companies are in this market, it takes a real amount of time to add capacity.

https://en.wikipedia.org/wiki/Cornering_the_market#Thales_of...

CVS Caremark, Express Scripts, and OptumRx manage over 80% of all prescriptions in the U.S

Amazon buys 50% of all books.

These examples are even more extreme than at least 3 major clouds present in the US buying hardware.

I don't think OpenAI purchase even comes even close to any of these.

And if you are going to protest with the common "OpenAI doesn't even build datacenters themselves!", yes, they don't, and it's a complete non-sequitur.