Warning: This post has the potential to be acronym laden. Read at your own risk.
As we all know by now, RAM prices are going through the roof. Some companies are even going so far as to exit the consumer market in favor of OEM sales. All of this is caused by the build out of AI systems by major tech companies. These systems have dubious profitability models. Here are some possible effects this sudden rise in RAM prices may have on the broader market.
- The Mountain Climber. RAM prices continue to climb. And climb. And Climb. This has the effect of making RAM expensive for consumer products such as SSDs, laptops and desktops, and, especially, smart phones. Other devices that rely on computer technology such as smart TVs are also affected. More expensive storage means more expensive devices, which slows consumer and maybe small business purchases. The electronics segment takes a huge hit. They will have to decide between selling equipment and worsening margins. Ironically, many of these companies are the same companies that are building out AI centers. So, the RAM manufacturers win but everyone else loses.
- The Crash and Burn. It turns out that no one really wants the AI stuff enough to pay for it. After hundreds of billions of dollars in capital investments and labor, most AI companies either go belly up or severely cut back on their AI products. Half or fully built datacenters are snapped up by the handful of tech companies that found a way to make AI useful enough for their customers to see value in them. With the buildout stalled or stopped, all that RAM that was held back floods the market. Consumers get a windfall, as cheap RAM allows for upgrades and lower prices, electronics and computer companies win back some margin, and AI investors go home with lighter pockets.
- The Old Ways Return. Back when I started my career, in the before times, RAM and storage devices were expensive and limited. You had to learn to optimize your code to run on computers and devices with extremely low resources. That changed when RAM and hard drives became cheap. We could add Gigabytes of RAM and Terabytes of disk space to even low-end consumer devices. Those times may now be at an end, and the software industry may need to go back and find ways to shrink the footprint of software. This means more cost and time for software development. More cost to the consumer too. Given the amount of competition in the software business, companies may not have the ability to raise prices and, instead, take a hit on margins and profits.
- The Soft Landing. The boards of companies investing in AI start to demand profits from AI that match the level of investment. In response, CEOs, slow, rather than stop, the build out of new data centers. RAM doesn't exactly flood the market, but prices start to come down as availability comes back up. Eventually, the market finds its equilibrium. At that point, consumer prices are a bit higher but not crazy high and some value from AI is achieved. Rather than a blood bath, larger companies go on a buying spree and consolidation takes hold. Most of the winners will be large tech companies and a handful of now incredibly wealthy entrepreneurs.
The Soft Landing is also possible, though less so than the Crash and Burn. The history of computing is rarely so pleasant. Just look to the Dot Com crash and the Storage Service Provider bloodbath for inspiration. This scenario is probably the best one for the industry and consumers alike. Prices come down and we get new and useful products. If this happens, it will be a unicorn.
The least likely is the Old Ways Return scenario. Software is a bit like food. Our ancestors lived with constant food scarcity. Over time, food became abundant and we no longer know how to live in a scarcity environment. That's why so many of us are overweight to the point that Ozempic is a major drug. Early in my career, I had to jam software into kilobytes of ram and disk space. Very few software developers today have ever lived with that kind of resource scarcity. RAM and disk space were so cheap that you could expect consumers to just buy more to suit your applications. Memory and storage space are just not something that extreme optimization is given time and money to anymore, and no one knows how to do it well.
If we get the Mountain Climber scenario, we're all screwed. If RAM prices continue to climb, it hurts the tech industry across the board. Consumers too.
These are just observations from my 40+ year old perch. I'm typically an optimist until given a reason not to be. I'm rooting for the Soft Landing, even if I think it unlikely. Let's see if we get the AI equivalent of the PC revolution or Dot Com crash.
