AI Made Everything Expensive (ft. GamersNexus)

Why RAM is so expensive

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2:54Hello and welcome to Better Offline. I'm your host, Ed Zitron.

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3:12Subscribe to the newsletter, join the subreddit, buy a t-shirt, all the links are in the notes. And here's a joke to kick us off. What do you call the CEO of a French RAM company? That's right. Emmanuel Micron. And that's what we're here to talk to Steve Burke of Gamers Nexus about today. Steve, welcome back to the Octagon. Emmanuel Micron. Yeah. You didn't tell me that one before we started. Yeah, because you would have killed me before I read it on the... But look, we're here to talk about RAM. So we'll start with a simple question. Why is RAM so expensive right now? What is doing this?

3:44I mean, the reason it's so expensive is not grounded in reality, I think. The surface of it is that all the data center build out is consuming all the memory and therefore price higher because everyone wants it. But I do think there's a little bit more to it than that. Right. So when you build chips, we're going to really simplify this one for the audience because it's a pain in the ass to explain otherwise. But when you build chips, you have something called a

4:16wafer. You have the silicon out and then you etch it using an orthography machine. But you can make less high... So there's the high bandwidth memory that they use inside GPUs. And then there's the regular DRAM that they use and everything else, right? It's a simplification, but is that fairly accurate?

Memory versus permanent storage

4:35I think the most base level stuff to know is that memory, some form of RAM or memory is in almost everything. A common misconception, I'm not sure. I think your audience is fairly technical, but a common layperson misconception is that storage is the same as memory. They'll use it interchangeably. Storage is like your drive that you put data on, like photos or whatever. And then memory is a temporary form of storage, a volatile storage that gets wiped when it's

5:05not actively being used, when you restart or something like that. And when they put stuff in memory, that's where... That's like RAM and such where they... Like that's where you put the stuff that you're going to need quickly. Right. Yeah. So yeah, memory is much faster than storage, permanent storage. And so it acts as this sort of transactional buffer to help get things to you quickly. So memory is in phones, refrigerators these days, cars, there's all kinds of different grades of memory. And it's used in pretty much everything to do some kind of quick... Like in a car, maybe you need to retrieve something

5:41related to like if there's a built-in map on the screen or something like that, or in a refrigerator, who the fuck knows, honestly. But I think that's... So that you can have a giant, horrible screen on your Samsung fridge. That displays you ads occasionally. Yes, exactly. Yeah. And so yeah, to go to your wafer count, yeah, there's different types of sort of production for memory. And you'll find DRAM is used in all of it in some capacity, for the most part. So you'll find DRAM dies in HBM, like inside of an HBM package. But data center,

6:17high-end GPUs will use high bandwidth memory. And basically every consumer device uses something called GDDR, which is just a lower bandwidth, kind of more normal solution that's not as overboard on the performance for a consumer application. But they all kind of come from the same place, which is a wafer. They're all cut from... Right. So right now, they're taking up more... They are using more of the... How much of that capacity

6:47are they actually using to build high bandwidth memory? So the stuff that's going in the GPUs? It appears to be an awful lot. I mean, so I know that the recent class action lawsuit or complaint, I should say that was filed, notes that the profitability, the plaintiff's attorneys claim that the profitability of traditional, like conventional DRAM is greater than the profitability of HBM. That was one of their claims. And yet they sort of argue that, and it seems like their

7:22evidence is good, but they argue that why would you shift more and more capacity to producing this lower margin thing, HBM, right? If like the easier thing to make is potentially higher margin. And so it does seem like more of it's shifting over there. You know, OpenAI caused that sort of big kerfuffle previously when they claimed 40% of just all DRAM supply globally. But that didn't happen, though. Yeah, it didn't happen. It was all like basically... One of the most insane... Just an insane story, by the way, just last year, for those of you who don't

7:54remember, a story came out that OpenAI was buying 35% to 40% of all the world's DRAM wafers. It never happened. Yeah. But we just talked about it like it did, but...

Antitrust and manufacturing realities

8:07It did affect the price. It did. But here's the question. So why is everything so expensive? Like, is it because... Are they just jacking the price up? I think so. I mean, so, yeah, there's a couple things here. I'll lay out like some of the highlights and we can... You can figure out how you want to go through them. But one of them is the memory industry has convictions, actually, in its past of price-fixing collusion and, as the DOJ dubbed it,

8:38cartel-like behavior. So this goes... The early 2000s, there was a bust. 2016, 2018, there was an attempt at a similar lawsuit. In the early 90s, the memory manufacturers were talking about how they thought their competitors were price-fixing and colluding. And so this is a long and storied history where they... And now there's an active lawsuit, punitive class action for price-fixing. So there's that antitrust aspect, which that obviously, you know, prices would be higher if you're just doing illegal things to make the prices higher. There's also the sort of physical

9:13manufacturing side, which is that to make memory, it's not quick to get another fab online. And the companies seem to sort of signal to each other through earnings reports whether they're going to expand capacity or maintain capacity of their fabs, which are factories for memory. So there's that aspect, which is if there's a real or not, a sudden increase in demand, there's going to be a law and latency to react to that with more supply if they even

9:45want to. So the current projections are 2028 or 2030 if we're getting like more fabs online. The other reason it goes up, though, is really simple, which is that in a server that goes in a data center, some of NVIDIA's newer solutions will use one and a half terabytes of system memory. So that's DRAM. They'll use well, they don't they don't they also use the same RAM as we find in smartphones as well? Yeah, LPDDR typically. Yeah. Yeah. So so Grace will use I think it's 5x. I think

10:18it's what they're on. Yeah, I pulled the numbers and it's something like seven 20 terabytes for an nvl 72, which is 72 GPU rack. Yeah, so you they do the single blade for the big boy is one and a half terabytes of system memory alone. And, you know, for perspective, a consumer desktop computer might have 16 gigabytes with windows these days, you probably want like 32. And they're taking one and a half terabytes for one, you know, server solution. But that's just the system memory.

10:53They also have other processors on there, like the blue point or blue field. I think it's called DPU takes 128 gigabytes. If I remember correctly, the GPUs take hundreds of gigabytes to like close to half a terabyte per GPU of HBM. And the HBM has a there's kind of a yield factor at play where, you know, you can when you talk about manufacturing, that means you're also talking yields. How many good products do you get for every bad? And HBM is more difficult to make. If you have a failure

11:27in manufacturing, then you're also potentially losing more silicon dyes that could have gone to more consumer devices. And you and HBM is made by stacking the memory, right? So it requires just physically more memory. Forgive me if that's kind of an apes description. No, no, it's fine. Yeah. So HBM, high bandwidth memory is literally just really high bandwidth. It's kind of like if you were to, if you were a city and you wanted to solve a public transit problem and you just built a shitload of, I don't know, let's take a massive tunnel.

12:02You build like a bunch of trains, you build a ton of trains for passengers, but you don't have enough tracks to put those trains on. They can't actually get on the track without blocking each other. Right. You haven't really solved your problem. And so high bandwidth is trying to solve that by saying, okay, we've got all this capacity for passengers, which is the memory itself. Now we need something like a bigger road system to actually feed that capacity through to access it. And so HBM tries to solve that, especially because you look at GPUs that might have like 12 plus times

12:36the amount of capacity that a consumer GPU would have. And so you don't want to starve the GPU core of the data that sits in the memory by not being able to get it fast enough. And so HBM tries to solve that problem. So yeah, to go back to your point of stacking, high bandwidth memory is physically vertically stacked as in they take silicon dyes for memory and they stack them atop each other and then they connect them all together as opposed to consumer memory where it's, it's closer to,

13:11there's still layers, but it's closer to a flat plane. Right. But it just means that by virtue of that, it takes up more space in the place where they build the chips. Yeah. Yeah. If you're on a consumer device, then the consumer memory, you'll need more physical area to put the same amount of capacity. Whereas with the high-end server stuff, you just stack that capacity vertically. And then it's also, HBM's really significant advantage is that it's very low power

13:42comparatively. Right. Yeah. But just to be clear, it takes up more space on the fabricator itself. Oh yeah. Yeah. If you're talking about the fab space, then yes, HBM requires a lot more space for a few reasons, uh, in terms of manufacturing area, in terms of like footprint on a product, it's less, but in a fab it's more. And, um, Why is that? In a, in the fab, uh, one of the reasons, so there's a few, but one is that HBM requires additional

14:12silicon pieces to be able to function. So with GDDR consumer GPU memory, you pretty much, you have the memory module. It looks like a black rectangle. And then if you were to use like, um, acid or something to etch away the black plastic part, you'd be left with pretty much a singular silicon die underneath. Uh, that's all it is for consumer. For HBM, you also need a logic die. So there's another piece of silicon, uh, that interfaces with the memory and the stack of memory

14:44because you need something to kind of, to command and control and understand, um, you know, the vertical tower you've got of memory. And then you also need an interposer die, uh, which sits underneath everything. So this is a solution that will sit under your GPU core, which is a very large piece of silicon and is shared with the HBM stacks. So all of your, your core and all your HBM is stacked on top of the same, it's called an interposer. It looks like a PCB, uh, and they all

15:18communicate through that. So that's another piece of silicon. And so for this, these reasons alone, there's also others, but you know, these alone, now you're involving more fabs. There's more logistics, shipping things around, and there's more, uh, fab or fabrication plant area allocated. Even if you're just talking about making, someone's got to make the logic dies, TSMC makes the interposers. Right. Yeah. There's just more moving parts and it kind of takes up more space. Exactly. Yep. So why, so to, to my early question, so this stuff is obviously lower margin, but they seem

15:52to be able to sell an absolute shit ton of it. So is that potentially why they're doing this? That just, they know there is insane demand on a level that for a high, well, I guess they can charge what they want for it as well. I'm just having trouble trying to work out what it is they're doing other than just filling their boots. Have you tried asking a chat GPT? Uh, no, I could ask my cat and get an answer I'd respect more, but it's genuine, but it's genuinely because it seems that, unless I'm misunderstanding here, that these micron SK

16:26Hynix and, uh, Samsung, they're just kind of cranking up the price of regular Ram because they can, I mean, to some extent. Yeah. So I think this is where the price fixing allegations come into. Um, I don't know if you try it, if you try to take their side, which I really don't want. I'm trying, I'm trying. Yeah. If you try to, I think their argument, whether it's her truthful or not, but would be, we've got this crazy high demand for HBM. These are guaranteed customers. I can sell terabytes of it to Jensen. And it's, it's one point of

17:04contact. It all moves quickly and easily. And this, there's this data center demand right now, and we don't know if it's going to be here forever, but consumers, you know, they're, they're always going to have to buy electronics or whatever. So I'm not exactly sure if that's, to me, it seems like maybe you make some sort of, you, you assign some value to the B2B relationship over B2C or something. Uh, maybe, but, um, also I guess if they, yeah, I'm not sure if,

17:35if you make less. Why would that mean that they charge more for regular RAM? Oh, as far as why more for regular, that part's easy. That's just because, uh, the HBM itself takes the same, a lot of the same machines as consumer memory. And so if you're making more HBM, you're naturally making less consumer, uh, which I think is where you start seeing the, the supply squeeze and the price go up. Likewise, um, a single piece of HBM can use up to something. I think it's like,

18:05it might be like 32 dies max or something of DRAM. Um, you'll commonly see like four referenced, but single piece of HBM will take more DRAM dies, uh, to build. And so one of the problems is if let's just say four, if you have a piece of HBM, that's got four DRAM dies in it and you have one failure somewhere in that stack, um, or in packaging and assembly, now you've destroyed, uh, you know,

18:35four individual pieces rather than if you have a yield failure with a consumer device, you destroy one piece. Sorry to ask a stupid question. What is a die exactly? Is that just the, what we would think of as a stick of RAM? Uh, no, a die is so, so a wafer, we'll start at the wafer level. A wafer is just a disc, right? It looks like a CD that typically eight or 12 inches, uh, and they, they process it and they pattern it or they literally project like a pattern or they

19:09lithographically etch a pattern onto the surface of this disc. Uh, once that's done, you know, these, these patterns, they're called patterns because it's a repeating sort of, um, set of shapes that ultimately form the logic that makes the silicon. And the, the word die comes from the process dicing. So with a wafer, when they're done producing it and patterning it and it's basically ready to become a product, they need to cut that disc into a bunch of small squares.

19:44Right. So it's like a big slab that they cut up. Yeah. It's, I mean, it's like making a pizza with a pizza cutter, you know, except they're, they're, they're doing a pattern that only psychopaths would do on a pizza, which is making a bunch of squares. And, uh, and so they, they cut it into the squares that's called dicing. Uh, and then each of those pieces, the squares that yield from that, those are the dies. And so if you were to pull up a, an image of any GPU, typically you'll see one large, it's called the monolithic die, which means one singular sort of piece of shiny

20:18reflective silicon mirror, like finish, uh, that's your die. And then for memory, same exact concept, just a lot smaller. Right. So, so right. Okay. So there's less space to make regular RAM. So they just crank up the price. That's really, that really is it. That's their entire thing. Right. But I saw Micron's earnings and they had 84.9% margin. So it just kind of feels like they're setting the price to whatever they want it to be. You don't think they're, you

20:48don't think that is, I, is that not enough? I think they need more, don't you? They should get 95%. Well, it's just kind of 95. Why are you setting the, setting it so low? They should get 110% margins. Yeah. No, it's just, it's very frustrating as well because I've read now arguments in favor and against Micron where it's like, oh, Micron got screwed by Apple and consumer electronics companies during the last, during the last supply chain crisis, because they, they kind of made a bunch more RAM than they needed to from what I understand.

The cyclical nature of memory

21:22No, it really, it really is. But what, and it seems to be, there's this boom and bust cycle in memory where they get a bunch of demand and then what, so do they build more capacity? Is it that they just order too much RAM and then people cancel their orders? Like what happened, what happened last time? It is cyclical. Um, yeah. So it's cyclical. I will say right now is nothing like I've ever seen. And we spoke to a bunch of companies, purchasers of memory,

21:53like G skill and Corsair who sell the sticks of RAM that you put in a computer. And those guys are telling us on record that, um, likewise they've never, this is not like part of the cycle. This is special. And, uh, as for how is it different? How the difference is how much the difference is the percentage increase it is this time. So, you know, you're looking at like 700% increase in price in some situations in a very short period of time. Normally cyclically,

22:23you'll see some ebbs and flows, but it might be like back in the day, a $50 kit of DDR4 became 85 or $90, maybe even 120 if it's a really bad year, you know, but you're still at like a little worse than double. Whereas now a $200 kit of memory is suddenly a thousand to $1,200. Uh, and so it's just the, the amount of the price increases, what's different. And then also, um, this time

22:55the sort of contest for the supply is, uh, it's, it's coming from within the own industry where the very companies that would be the cause for an increase in sales of consumer supply are now the cause of these like insane, unprecedented volume of sales for AI component.

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27:49But it isn't based like, so the 2021 supply chain crisis, chip crisis was because there was a flood of consumer spending after COVID. Yeah. And that led to a bunch of consumer demand for products and overall spending across the board, but like consumer demand drove it. This one seems different because it's not demand outside of the, outside of whatever, like psychosis, the various hyperscale says. Like they're not spending a trillion dollars in CapEx really for like a, it's not like consumers

28:20can't access whatever Microsoft. Well, I think, you know, what's interesting is the big three memory makers decided not, uh, I think it was 2022 or three to bring on more capacity in some of these situations because they were talking about how they, they got burned by oversupply and sort of following COVID. Right. But what's interesting is if you go and look at some of the small suppliers, not many of them, but there's a couple of small memory makers that make up like less than 5% of the market. Wind Bond, Nanya are two of them. Nanya's in, uh, well, headquartered at least in Taiwan. I

28:55don't know where their fab is, but they, like these two companies, as far as I'm aware, I was just looking at this this morning, uh, they increased their, their production capabilities at the time when the big three were saying that they weren't going to do it because it's, you know, they got burned. Um, right. Is interesting to me because if you're, this is the argument the lawsuit makes too. If you're a small company, I would think you're at the biggest disadvantage, the biggest risk

29:26to increase your production capabilities with this massive amount of spend. If your biggest competitors are saying like this, it looks like bad times ahead. You know, we don't want to spend into this, but if you're a small guy, like you're at the greatest risk of going under if you fuck up your, your cat back, right? Why didn't that this, maybe this is a dumb question. Why didn't them

High bandwidth memory limitations

29:47increasing supply allow them to kind of undercut the microns of the world? Yeah, that, that one is just because the, there's a micron does have a technology advantage so they can make memory that these other guys can't. HBM is one of them. Maybe this is, I didn't think about this till now, but, um, maybe there is a very, a small part, I think, but, um, possibly part of an answer to your question of why HBM, that is something that's, that other companies are struggling to make successfully in

30:21current generations. So it's, I know only like SK Hynix, Samsung, and Micron are the ones who can make HBM. Yeah. And the CXMT has also struggled with HBM and they're a new Chinese memory maker. That's actually done really well with DDR five. And so there may be a little bit of a pulling the ladder up, you know, after them factor. Well, here's a question as well, when it comes to high bandwidth memory, surely this is going to lead to an oversupply situation regardless because HBM is used in what video cards got, that's such an anachronistic term in the AI bubble. Um, but

30:56like it's used in video cards and AI GPUs basically. Right. Yeah. It's very limited. There's almost, there's effectively zero consumer use case. So when the AI bubble bursts, where does the high bandwidth memory go? Uh, Oh yeah. I don't. Oh, okay. Yeah. Because I, we don't talk about the bubble burst in it. Well, that's the thing. I saw Samsung is talking about increasing their high bandwidth. They're spending like 50 something billion, $500 billion across an

31:30indeterminate period, but like also building an entire new high bandwidth memory, like factory. Yeah. And that, but I was looking, I think I sent you the graph for coming on. There was, I saw this chart where it's like they were making what? A couple hundred million gigabytes of HBM. This is in 2022. And they're now selling like seven or 8 trillion a year. Yeah. So what's crazy is, um, the HBM bit demand. I think I, I think I first saw this on semi analysis,

32:04if I remember correctly, when I'm at the sort of site, but the HBM bit demand from Nvidia was, uh, recently projected to exceed all HBM bit demand of all other companies combined from 2025. five. Good. And that's just Nvidia. And, uh, and again, you have more wafer area per bit than with DRAM consumed that counts yield losses. Right. And so like increasingly as they make more and more of

32:35this, uh, presumably for Nvidia's devices, you will continue to see consumers really get shafted if there's not new supply online soon. And likewise, if they're focusing all their efforts and resources on HBM for whatever reason, uh, who's to say that the new fabs will even make consumer memory anyway. Right. Like there's, they might just make more HBM. But the thing is, if they're all built to make, maybe I'm missing something. They're building this fact, these, these fabs specifically for high

33:09bandwidth memory behind bad with memory is only used really for the thing in the AI bubble, right? What are they going to do with all this capacity when it's gone? Like they would switch it over. They switch the line. I mean, they would, but it's like, I guess they'll just have, aren't they just creating a future nightmare? Uh, I mean, it's always good to have more capacity for them, I guess. I, yeah, I mean, I guess it's good to have more capacity. There's a lot of government money floating around too, right? Like Micron got a $5 billion tax break in New York. Um,

33:39as part of the, uh, the, I guess, big, beautiful bill, but the 5 billion, like Micron said, they're going to spend 250 billion, right? Samsung and SK hynix have made $2.1 trillion worth of commitments. This just feels like it's, it's almost like they saw what happened in 2021 and 2023, which ended with all of them doing at least a billion dollars of write-offs. And when they were like, fuck that, we can go bigger. Yeah. Well, I mean, I do think personally,

34:13I think that they are colluding again. I think they are price fixing. Um, it might be through like a parallelism rather than a literal behind closed doors, meaning like we're just going to announce our changes in earnings reports. And then our friendly competitors will kind of mirror us. And so, yeah, like it's kind of a prisoner's dilemma. Like if they don't raise prices, the other guy will, if they, and if they don't build capacity, the other guy will,

34:46they won't get the long-term deals and all that. Yeah. And I also, you know, the, the wafers themselves, I have some interesting numbers I wrote down, but, um, I was looking up when you were asking about HBM, I went and pulled up some of the original coverage I did of HBM, which started to come online or at least was being actively developed somewhere around, I don't know, 2013 plus or minus a bit for AMD GPUs. So yeah, when AMD was working on Fiji and its

35:21Fury GPUs, they, they debuted HBM actually for consumer devices. They had HBM on Vega and on a couple other architectures in like the 2015 to maybe 2018 area, plus or minus a year or two and, uh, massively expensive, just like it is today. The power efficiency was great, which is really why they used it. Although they were bandwidth starved too, but I, I pulled up, I had done some reporting at the time where I spoke to a bunch of the people in the know in the industry.

35:53And at the time 2017 or so 2016 area, the HBM two memory for one of the devices, um, should have cost around $150 cost for them to, to buy. And the interposer in the packaging should have been another $25, 175. Uh, and this is, these are, you know, this is old technology now. It's, I'm sure a lot different, but the point of bringing it up is that if you compare a sort of time for time and at the

36:25same capacity at the time, it would cost AMD 175 bucks or so to put HBM on its device. Whereas with GDDR memory, the non HBM stuff, they would have been at somewhere around like $68. Uh, so they would be just, so I guess the thing is they absolutely would make more money selling DRAM or sorry, GDR, like regular people RAM. It's just that right now they have the business to kind of, it's not just shitty. It's not these bullshit video cards for loser gamers. It's selling, um,

37:01AI GPUs to big strong boys. Yeah. Right. And yes. Like Sam Altman. And yes, big, the big, strong, hunky men like Dario Amadei. Right. Right. Yes. Yeah. He, I've never, by the way, I don't think I've ever seen someone spread so much fear so anxiously as him. It's just, yeah. Yeah. Pathetic. Yeah. Also, you ever know, here's a random thing as well. For this question to the listeners and to you as well, Steve, you ever see anyone on,

37:35you've seen this weird habit of Silicon Valley people of using AI now to add muscles to guys? Yes, I have seen that. You've seen this at all? What's that about? One of the weirdest things I've seen in the tech industry's history. And there's a lot of weird shit. I don't know if it's just, well, they're, they're not used to working for intellectual property at this point. They just harvest it. So why work for the muscles either? Well, it's just, it's really strange. Like I, like, I think the, the, the TBPN, the technology, the Blowjob Brothers network, like they, um, they, um, they do it with like

38:05Dylan Patel, who's just like a regular sized guy. And it's just, it's sorry. I've just realized that's weird. But then I saw someone do it for Dario Amadei the other day. And this is like, your body's your body. I don't judge people for, for like how they look. But at the same time, Dario Amadei is not like a, like fifth course of steroids guy. Like it's just the weird, it's the weirdest thing I've ever seen. Well, I saw, did you see the story just recently of the, uh, copper thieves stealing shit from data centers too? No, that, that was good.

38:39Average better offline listener there. Yep. Yeah. They'd probably wear one of your t-shirts just, Oh God, no, I disavow them. Yeah. The, uh, I saw there was a title of, um, of thieves stealing copper from data centers as like, Oh, okay. I mean, it's really, I guess there's no honor among thieves, you know, it's just thieves stealing from thieves. It's also inevitable at this point, because you make these giant things full of earth metals and then you put them in neighborhoods, usually with like,

39:13like disadvantaged farm neighborhoods or like, like distressed towns in Texas. You're like, Oh, I wonder what will happen with the other business in the area. Yeah. I wonder what will happen when we screw over all these people and, and like mock them via the media constantly. Anyway, back to, back to Ram. So is this something

Impact on solid state drives

39:33that's going to start affecting like storage? So hard drives and such. Yeah. Yeah. Yeah. So you mean like actual, uh, yeah. Like solid state drives and the like. Yes. So it's already affecting it. Um, storage is made at the same fabs for the most part as memory with basically the same tools and mostly by the same companies, although there's, there's like one or two differences, but for the most part, it's the same people and tools. And so definitely one affects the other

40:08anyway. Um, but storage in general has, it hasn't gone up as violently as memory, but it has gone up. Uh, some of the SSDs we had bought previously. I was just checking this actually for like 90 bucks, uh, maybe about a year ago are now closer to like 180, 190 and Jesus Christ. Yeah. Uh, let me pull up a chart here. That's just, this is genuinely like, I think, I don't know if I'd say

40:39I'd do anything that's activism, but like, I think people just need to know this is AI's fault. Yes. And it, and the worst part is it's not even AI's fault because they need these data centers because they're taking forever to build. It's like, you can access clawed and chat GPT. You don't, there's no one, no one's like unable to log on because there's not enough data centers. Nothing's being stopped. They're just like, no, we need to do, we need to buy, buy the chips, need to build the data centers for some reason. Yeah. It's, I mean, yeah, there's not like a queue.

41:09I mean, I guess they're, maybe they make the argument of like, we're trying to make it better and the models will be more complicated and that requires that going to happen. But yeah, the, uh, storage though. So looking at an average price chart for four terabytes of solid state drive storage and VME on PC part picker, which averages it, um, they have the pricing at around, it looks like maybe about $270 in January last year. And now it's somewhere around,

41:43somewhere around $800 and $900. And that's for what kind of storage? That is for four terabytes. Uh, so relatively large capacity, which is going to be affected the most. Jesus Christ. Yeah. And this is where, this is interesting too, because one of the ways you'll see consumers getting shafted. That's not as obvious is, um, some of the modern devices that should be your next sort of, you know, improvement upgrade on past generations. They're actually coming down

42:13in capacity. So I haven't looked at the exact device names for a while, but we ran a report a while ago talking about some of the phones and laptops that have shifted from say a prior model of 12 or 16 gigabytes down towards eight for memory. There's decrease in storage capacity as well. Yeah. That's fucking terrible. So everyone just suffers here and it's pretty like there's Microns, SK Hynix, Samsung, they could just, they could have not done this just to be clear. Yeah.

42:44They could have sat with like 70% margins. They're already colluding anyway, in my opinion. So yeah, they could, they could collude in a different way. It's just, it's so fucking straight. Well, I mean, it's actually, no, that's not, that's not fair. This isn't strange at all. This is exactly like, this is exactly what companies like this do. Yeah. Like this, it's this kind of vulgar kind of chancerism and their argument from what I understand is, well, memory is cyclical. So we need to fill our boots when we can.

43:15And if you're calling something vulgar, then it's pretty vulgar. Yes. Just to be clear, as the vulgarist man in tech, and that is a word now. But the thing is though, just to be clear, that's their argument though, that because things are good now, they can charge what they want so they can fill their coffers for the future. Yeah, I think so. And I mean, you see it affecting, I think that's, that's probably their argument. I think on the consumer side too, even a company like Lenovo, which is not a manufacturer

43:47of memory, but they buy it and they put it in stuff. I'm not sure if there, there may be this, I don't know for fact, but there may be a benefit for some of these companies as well, for a few reasons. One is there's a lot fewer, it kind of reminds me a little bit of COVID when all the stores that were 24 seven, all the, the grocery stores and whatever suddenly stopped being 24 seven. And at least where I am, not one of them has gone back. And I think that the memory

Lowering consumer expectations

44:17capacity kind of equivalent here is this offers a little bit of a reset. And so with that, lower those expectations. Exactly. Yeah. And now your next upgrade is more exciting. And what I noticed with Lenovo when I was buying a laptop was, uh, they had quietly snapped out of existence, their 64 gigabyte model memory system memory of the device I was looking at. And they only had 32. And I think like the memory hard sold it onto it as well. It is. Yeah. You can also, you just can't upgrade. You're just

44:51stuck. That's insane. Yeah. And so I think what happens there for them, you know, in their favor, I might argue, well, they can't, they're having trouble getting supply just like everyone else. That's probably true. Uh, but against them, if they've got 64 gigabytes of memory, because that's just one part of the, the total bomb for a laptop they sell, they might rather sell two people, two laptops at 32 gigabytes, right. Where they can get the markup on the whole thing. Right. Rather than one guy, a 64 gigabyte laptop where they're only marking it up, whatever the,

45:24hopefully, whatever the difference in the memory is. Um, so I think you see some of that here too, where there's, well, they're just going to use it as a chance to reset what people expect. And just also prices are probably never coming down, right? Lenovo itself. Funny enough, uh, that I was using them in this example, just like two weeks ago, um, at ISC said that prices will probably the word they used was never come back down to what they were, uh, last year. And, uh, so yeah, I think

45:55they're truly evil era. Just like a, like a disgusting era full of horrible perverts. Cause it's just, it's so frustrating as well, because America has price fixing laws. Yeah. Like they, like we have price gouging laws, like we have means of doing this. We just don't do it because obviously of capitalism and they've been enacted, you know, like the DOJ itself busted these same companies in the early two thousands. Yeah. That was before, that was before we had social media

46:26for psychopaths to talk about stocks all day. Now we need to get, now we need to, we need just a borderline corruption or real corruption in everything. That's the only way to get things done these days. And I think also there's probably incentive to, you know, if, if you're no administration of any party wants the economy to fail on their watch. And I think if you're worried about a bubble pop and especially if maybe spooking investors with a DOJ investigation or something might, you know, trigger part of that, I don't know, it just seems like you wouldn't

46:59be incentivized to not probe too much.

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51:32But isn't this going to cause just, or it is, causing hyperinflation within all electronics-related products? Because it seems that these companies are fully dedicated to the graveyard smash of making everything more expensive forever. And at some point that will

The shift to cloud services

51:47start crushing all consumer electronics. Yeah, I think it will. You know, for some things that can migrate more to software as a service and hardware as a service, I think there's an end game there for some of these companies where... Tell me more. I think if it's, okay, we crushed demand for the gaming GPUs market because filthy, poor, casual gamers can't afford our big, strong GPUs that we need for data centers. You know, I think if you crush that

52:19market, there is potentially an out in the form of cloud gaming, or maybe a better example where you don't have latency as an issue, would just be if you, as a company, if you're worried about consumers getting systems that are powerful in their hands, and doing, using LLMs at home or whatever, if that is suddenly out of reach because the memory is too expensive, and the GPUs are too expensive, all right, I guess they come crawling back to cloud or chat GPT. So I do think not everyone's

52:54going to be able to grab that parachute, but I think that moving services to cloud-oriented services that you pay for every month is a way that they can capture the people, which is going to be most of them at some point, who can't afford to actually own the full device to do stuff locally. But cloud gaming sucks. Cloud gaming sucks, but also I don't think that's the only place where you see. You know, I think one of the real, if anyone here is genuine about LLMs and AI being a future, I

53:29would think at least companies like OpenAI would be worried about LLMs getting too good if they're locally hosted for like, let's just say the vast majority of basic tasks someone might want. And by all the prices of hardware remaining elevated, it does kind of keep that at bay a little longer. I just, because I understand that, and you've said this before, the idea that they want to push people towards not owning anything. You'll own nothing and you'll love it, I think is the

54:01phrase. But at the same time, do you think that that's actually their plan? Or do you think my version of this is much simpler, which is, do you think they have one? Or is this just incredible short-term and is thinking? Yeah, I don't think it's the plan. I think it's like the fallback for the few- Google Stadia, we all know, was a huge success.

54:24I contributed to the failure of that one. Hey, yeah, that one- There are 10 people who must be so angry at you, man. Oh, I'm sure. There are dozens of us. GeForce now, I had numbers at one point. I don't have them currently, but it had a lot of, actually, I think we talked about it on your show, because I pulled up their website. Yeah. However many millions of users, and both of us were kind of surprised at it. But yeah, I think, you know, I think gaming is sort of the easy one to point to. I think for a lot

54:58of casual users, they might be okay with cloud-connected gaming. But I do think there's more services than just gaming, you know, that could be sucked into the cloud. Even just stuff like QuickBooks has been the one I've been ranting about recently. I'm surprised that that isn't already sassed. Well, it basically is, because the desktop version, it used to be a buy it once for $300, then it went to $700, and then they went to $1,500 annually for the desktop version.

55:30And you have to log in when you launch it, just like Adobe software. Oh, good. And now they're killing desktop entirely, and you have to go to cloud, which I just abandoned it and went to a free tool instead. But the point being, yeah, I think a lot of these services, they do just increasingly go cloud-connected. Well, the problem is, is cloud-connected services still require RAM. I mean, just anyone who's ever used an AI tool that's still in your browser, well, I mean, Chrome itself is a hog,

56:05as we all know. And so it's just kind of like, it feels that there's just going to be a point that this escalates to the point that it kills large parts of the consumer electronics industry. I mean, Sony's delaying the next PlayStation, Microsoft is increasing the cost of the next Xbox while firing all the people who know how it works. Just an evil company. I mean, it's The Steam Machine is a great example, too. I love that. I just got one. I fucking love it. Oh, did you really? Wow. I really love it. It's just what I, but the thing is, it's also insanely expensive.

56:36Like, yeah, it's unbelievable. Yeah. It's because the Steam Machine, we had talked to them and the quote they gave us was amazing when I'll paraphrase it to the best of my memory, but they were talking about how I asked them, how did it work buying from the memory manufacturers? Like, did you get a contract price or how did, you know, how did you guarantee your memory supply? And the answer was, there are no contracts. And the, the valve guy told us, uh, they're offered

57:09a price by the memory supplier. In this case, the one we got was Hynex. And if they say no to that price, then the quote was, they never talked to us again, which is why I feel like it is cartel-like behavior. I got some, I got some thoughts. I don't think I want to share on the record with, on that one. That is just, I, you know what? I'm right back around to just, I hope these companies suffer. Like, I think the memory companies are evil. Like that's just an evil way of doing business.

57:40Yeah. I mean, if it's coercion, right? Cause it's like, if, if the play is I offer you a price, you say, no, fine. I'll take my supply and sell to someone. I'll never even talk to you again. Like you're now down to two companies you can buy from. Right. And it's not like, and it's not, and if they'll never talk to you again, it doesn't matter if they build more supply. Right. Yeah. If, if you're on their blacklist. And they're doing that to Valve as well, who were like the, like royalty within the PC. It's just, this era is just about the companies chitting on the people that made them rich.

Coercion in supply contracts

58:15And it's, you know, the crazy part to me is it's like the valve is not a poor company. You know, they're private. So we don't know how much they have, but they are definitely a multi-billion dollar company. And valve is getting bullied by the trillion dollar companies, which are only the trillion dollar companies because of the stock speculation. Right. Yeah. Not like actually, but yeah. Uh, it's just, it's insane to me because it's at a Corsair same thing. Corsair has no real power in the purchasing and they're almost

58:53a billion dollar market cap. Not quite. Um, I don't know if they've, how far they've fallen, but they were at one point a billion dollar market cap. And at point being like, these aren't nobodies who want the memory and they're struggling to, to get the memory suppliers to talk to them. They're like, they're serious players and they need a lot of it, you know? And the response is take it at this price or go fuck yourself, which is crazy to me. I was reading about the long-term agreements that SK Hynix is presenting. And apparently they're considering removing price caps because apparently they do the long-term agreements.

59:27Yeah, they do. And then they say, okay, we like, they won't go above this bound so that you don't just get rogered. They're just not doing that anymore. I guess. Roger it is. I don't think I've seen rogered. Classic British, British, beautiful British phrase. I was going to say, like when I took, uh, British literature and before I dropped out of college is the last time I read that. Yeah. Um, I think the, the, in the memory supply, typically contracts, they do set a ceiling. And then my understanding is the way the contract

1:00:01works. If you're lucky enough to get one is that you're offered the supply and you have to buy it or you have to pay a penalty basically. Yeah. Take or pay. Right. Yeah. Yeah. That's, it just feels like the natural end of this is going to be horrifying. It's just going to be, it's going to be because they're going to be sitting on all this high bandwidth memory. And I was having a conversation with a friend of the showcase could go yesterday. And he was, he was saying that like, well, they'll sell it to someone. And while I agree on that in theory, we're talking about going from a few hundred million gigabytes of HBM

1:00:39to trillions of it. So someone is going to be left holding the bag. Maybe it won't be the memory companies, but there's a situation where Nvidia or someone else is just sitting on the stack of this crap. Yeah. If, if they can't find devices to put it in, and they oversupply, then it'll be the same type of apocalypse we've seen in the past.

The risk of market oversupply

1:01:01I mean, 2016, like typically though, this benefits consumers on the crashing side of the wave because you can, it becomes commoditized. You can get a super cheap. Um, I'm not sure what happens here because one, we've already reset the expectations like we were talking about. So there's always already been a regression in the technology that'll take a few years to kind of get back to where we were. Uh, but then also whatever crash happens next, seems like it's not going to be isolated to the memory industry, right? It seems like it'll be a,

1:01:33like a, I sent you a photo during Computex of Nvidia's advertisement in Taipei that said, it all starts here. Do you remember what you replied with? No, I do not. You replied with it parentheses next global financial crisis. Yes. It really is though, because it's like, think about it. If we have just this glut of high bandwidth memory, how, how many graphics cards do they realistically make? Because when I was saying

1:02:04hundreds of millions of gigabytes, that was back in 2022. So this was the demand for these things for every games console manufacturer, every PC manufacturer, everyone. And as of 2022, when the economy was doing a lot better, right. And they only needed a few hundred million. Uh, we could be sitting on arguably the largest supply glut in memory history for like a non for like, like you can't unbuild that memory, right? You can't pass it out.

1:02:38You can't really, there's no way to, you would need an HBM device to put it on. There's no real consumer HBM devices these days. And it's not something you'd spin up fast. So yeah, if there's like too much HBM, you don't really have a lot you could do with it other than, I guess, sell it for cheaper or something. But like at the end of the day, you need something to attach it to. And, um, I mean, one thing to think about is part of those numbers, although I don't think all of it, but part of it is that the capacity per device has increased a lot for

1:03:12non-consumer devices since 2022. Uh, so some of it is accounted for there, uh, where you just put more on a device, but then you look at consumer and like somewhat notoriously, it has remained stuck at, uh, like eight gigabytes to maybe 16 gigabytes for a consumer GPU, which eight is barely even enough to, to play modern games with any kind of reasonably, you know, high texture settings. Um, and so you don't have that multiplying effect in consumer. It's just in data center, which

1:03:46all that to say, if more supply capacity goes online, if they're able to produce more, uh, but the data center demand slows down or the data center GPU demand slows then, and they switch back to just consumer DRAM, they're still going to have too much because the consumer devices are, they don't use that much memory. Um, so you, I don't know, you, you finally spec them up maybe, but, uh, but you'll just have all of this insane amounts of high bandwidth memory to go. We're just going to

1:04:20get graphics cards with 128 gigabytes of high bandwidth RAM. Just, just because they need to put it somewhere, right? Yeah. We've got to do something with it. We're just going to have a laptop and you'll be able to open 17 or 18 Chrome tabs at once. It's going to be incredible. No, I think, I wonder if there's also going to be a knock-on effect of all of this on the used gaming market, like the used PC market. Well, that's a really common, um, common. I see people asking about like, Oh, surely this is going to be good for secondhand in a few years when they

1:04:54retire all these devices or the bubble pops. Oh, I just, I mean, just like right now, I mean, just people won't be buying new devices. Yeah. Well, I mean, on both of those right now, it means that if you go look up RTX 30 series cards from, I don't know, like a shit, I think it might be four or five years ago now on eBay, some of them are like within 20% of what they sold for new, you know? And so it's, it's wrecking the used market. Cause it's just like, it's not, you're paying close to new prices for something that's four years old. So that's not good. And

1:05:29then on the other side of it, none of the data center hardware is useful in consumer. There is no secondhand use case. Yeah. Yeah. LPDDR5X is either on some form of server specific cam, uh, card or is soldered to the board. So you can't use that. And maybe in China, they'll de-solder it, you know, and solder it onto new sticks and sell a Frankenstein thing. But, um, and then the GPU is it's HBM. So it's, it's attached to the GPU. You can't just,

1:06:00you can't just like take it off. Well, this is, this is the thing as well. When it comes to like this post.com bubble recovery story, this is, I'm glad you brought that up because it's like people like, Oh yeah, they'll just use it for something else. It'd be useful infrastructure. It's like, what useful infrastructure? What are we going to do with all these GP? It's not, you can't run a black well, like a GB 300 is what's a grace and two black wells. You've got over a terabyte of different kinds of fucking rams on that. I love saying rams.

1:06:31Um, and you, what are you going to do with that? It's not got, it's not got display port. Yeah. It's not going to do anything. It's still, it's built for one thing. Right. Maybe a local AI model or whatever, but anything reasonable, you couldn't do that unless it was in a consumer hardware shell. Yeah. I assume you need like a dishwasher plug for it or the washing machine plug, even like, yeah, you probably need 240 volt. Um, Jesus Christ. People really, people need to do some, do some actually like reading about this because it's

1:07:04like, they need to realize that this can't go anywhere else. Like this just, we're just going to have fracks of these things. And it's not like in the future, there'll be cheaper to use. I think that the, that, you know, if the.com era argument of infrastructure was dark fiber or something where the fibers in the ground, it's just, it's not used because all the companies went belly up. Eventually they used it. Uh, maybe that's your argument there. I, I really, I agree with you. I don't think it works for this one because the closest thing we have to an infrastructure gain maybe is power. Yeah. The problem of they're not really bringing

1:07:40more online fast enough. Uh, and it's, it's at least currently it's not helping the prices for the rest of us. Like almost everyone's had their power costs go up lately. So maybe that would be the advantage. I feel like because of data centers, we brought back nuclear and we have shit loads of solar and wind and whatever, but that's not what we're doing. We're playing gas turbines on the roof, you know? And I don't know. It's also what if the power doesn't, what if the power gets built and the demand isn't there? It's just, there's so many things

1:08:14that could go wrong here. And I think people just kind of, I think the reason that this is all coming to a head is because we're finally facing the physical problems. Yeah. Like there's only so much capacity. There's only so, there's only so much money. There's only so much power. There's only so much silicon. I, I, at some point this all has to break and it might break everything. Yeah. I think, um, I don't know what the, I don't know what the Enron moment will be, you know, I'm not sure where it'll tip, uh, but it does seem inevitable,

1:08:52but, uh, I don't know. It could be a year. It could be several years, right? Like I have no idea. It could just, it feels like the moment, the, the vibe shift because the trigger I'm looking for is

Nvidia as a single point

1:09:04that capex pullback. But what scares me somewhat is the Nvidia is the, I think what 55, 65% of all high bandwidth memory demand, all for AI GPUs. Yeah. That just feels like a single point of failure. Yeah. I think Nvidia, uh, I mean, Nvidia itself, Jensen Juan himself said of core weave that without Nvidia, there is no core weave, you know, like if I remember correctly, that was,

1:09:37I'll go dig that up, but they, you know, they create the circle. Nvidia is part of the circle and it's, uh, yeah, if anything happens to them, then all of it falters. Um, and they are a king maker and yeah, but they're also going to be the king loser. I think by the end of this, just, it kind of, it's just so fucking, I guess. Yeah. It's so fucking frustrating as well,

1:10:09because I feel like if we'd have slowed this down in 2024, we could have avoided this, but everyone was like, no, we need to go further and harder and faster and spend even bigger and more amounts. But one final question, surely with the increase in high bandwidth, like actually, maybe it's two questions in one, the memory companies are kind of have Nvidia over a barrel too, don't they? Uh, in the sense that Nvidia doesn't really have alternatives, but Nvidia is also heavily involved in the R&D for all this new memory. So like they were involved in the R&D for

1:10:44GDR7, G5X, and for the new HBM options. And so like over a barrel, I feel like, I think you could make that argument, but I also think that Nvidia is more likely pulling a lot of those strains, despite being the customer to very few suppliers. Right. But at the same time, doesn't this just mean that Nvidia's prices are going to get linearly more expensive the longer this goes on?

1:11:16I, yeah, I do think, I do think the prices go up. I mean, we're, you know, with Nvidia on the consumer side too, you can look at that as a gauge. They were supposed to launch their refresh of consumer GPUs like a year ago or something almost. And, um, not quite a year ago at close. And, uh, like rumors were end of 2025 and then it was first quarter 2026. And then the rumors were, they were all canceled. And the reason for that is because this particular type of refresh, they call the super series. Normally you see an increase in memory capacity at roughly the same price, or you see a

1:11:48decrease in price at the same capacity. And right now, neither of those things is possible. And so Nvidia hasn't shipped the card. It may come out at some point, but for now they've delayed that indefinitely. And so to your point, it does start to self cannibalize, right? We're like, they are the reason that their own refresh for consumer can't come out. And also, but regular, the cost of the things they're already making, the current generation will go up.

1:12:18Yeah. Oh, the current generation has already gone up in terms of like real world pricing. And, uh, uh, officially they haven't changed their MSRP from launch, you know, but it's, I mean, a lot of this stuff, the 5090 is, I guess, technically sometimes you can get them at MSRP, but more often they're like two to, I mean, like the AI GPUs. Oh yeah. I mean that I would, um, just like all of them will go, it just feels at some point the money's going to run out and it's

1:12:53the longer it goes, the worse it will get. Well, and then you get the weird lease back stuff, right? Like with meta and the GPU. Oh yeah. And all the SPV shit. What a horrible era. Truly awful.

Upcoming documentaries on Gamers Nexus

1:13:05Cool. And I think that's a, that's a great place to end it for us. Uh, Steve, where can people find you? What you're working on at the moment? I know you have some sort of campaign campaign, a dystopian campaign you want to. Yeah, we do have our AI dystopia coverage. We're doing, we have a, uh, we're trying something new. We do these documentaries that are like three hours long and we're trying something new and doing a short one. So we're doing two 30 minute ones coming up. Uh, and one of them is on the hard drive cartel, which is pretty interesting. Nice. And the, uh, the other one is on this memory class action lawsuit. We read through all 118 pages of the

1:13:39filing and, and did a bunch of history research. So those are coming up within the next week on gamers Nexus. And we'll get the links in there. I don't know what I'm going to be doing next week on the show because I'm recording this a little early. I'll have a monologue for you on Friday though. I have been Ed Zutron. This is better offline. You know where to find all my stuff will be in the links. Thank you so much for listening. Thank you for listening to better offline. The editor

1:14:09and composer of the better offline theme song is Matt Ossowski. You can check out more of his music and audio projects at mattersowski.com M A T T O S O W S K I.com. You can email me at easy at better offline.com or visit better offline.com to find more podcast links. And of course, my newsletter. I also really recommend you go to chat. Where's your ed.at to visit the discord and go to our slash better offline to check out our Reddit. Thank you so much for listening.

1:14:39Better offline is a production of cool zone media. For more from cool zone media, visit our website, cool zone media.com or check us out on the I heart radio app, Apple podcasts, or wherever you get your podcasts.

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