The latest developments in the tech industry have gotten me thinking about how much the pursuit of short-term profits with AI has blinded major companies when it comes to the long term. It’s truly incredible how much the tech industry loves shooting itself in its own foot in the name of short-term profit.
By now, it’s no secret to anyone following the tech news that the price of RAM, NAND flash and other components is skyrocketing out of control due to the enormous demand caused by the current AI fad. New server farms spawning to support the AI craze are eating up as much RAM as the three global manufacturers, Samsung, SK Hynix, and Micron, can produce. That means little is left over for the consumer even though demand remains unchanged causing prices to skyrocket.
Both the large AI companies and the RAM manufacturers profit handsomely from this arrangement now. One of them, Micron, has even announced that it is going to exit the consumer RAM market entirely to focus solely on HBM (high bandwidth memory — the RAM used to power servers) which has only exacerbated the problem.
The focus here is clearly on AI and short-term profit. Executives of companies pushing AI have made big promises to secure massive investments and are now under pressure to deliver to investors. They want bigger and more capable LLMs which means they need ever-increasing amounts of computing power to train and host them.
However, in their blindness, they’ve forgotten the consumer: both the individual buyer and other businesses. RAM is used in everything from computers to phones to cars to refrigerators, not to mention the machines used to manufacture these items. A shortage is going to drive the prices up for everything.
I would never expect large corporations to be especially humane and this isn’t about expecting sympathy or consideration for consumers, but rather about how they can forget about their own traditional bottom lines in the long term.
In their blind pursuit of AI-driven profits, the forgotten consumers are going to buy less because they won’t be able to afford the components whose prices have been driven up by it. Most of those companies also sell consumer products. Not only is this business going to be hurt, but as they buy less, there will be fewer devices capable of running their holy AI which ultimately means AI will also be less profitable for them. The latter also applies to companies like OpenAI or Anthropic that don’t otherwise sell consumer products.
It’s a lose-lose situation for everyone and it’s astounding to me that they don’t appear to have even taken it into consideration. Unsurprisingly, it’s similar to how they are constantly bragging about AI taking jobs. The less jobs there are, the less people buy and therefore the less companies can profit by selling them products or services. If you lose your job job, paying for a subscription to use the AI that put you out of a job isn’t going to be particularly high on your priority list.
I’m not trying to say all is doomed with AI. That isn’t what this post is about. AI has its uses and I do frequently use it. It isn’t a bad technology. What I’m ranting about is the companies that are bulldozing everything else in the name of the short-term profits to be had by the AI bubble. Prices are rising everywhere because of their obsession with it which is ultimately going to backfire for everyone — even for them.
Here are a couple of links to articles that discuss the issue with soaring component prices in more detail:
