Technology

Have to dig into the nuance of this specific scenario.

A new memory vendor would be a huge capital expense, and investors are generally a bit apprehensive about that.

Further, it would be years before they could theoretically roll out product, a delay that investors would need to be awfully patient for under the best of circumstances. Further, we went through this dance in recent history, people thinking that the chip industry needed huge advancement and expansion of supply, only for demand to subside to normal before any of that expansion could even start.

And the stated payoff? Lower margin product than competition. Not exactly exciting to tell your investors your whole game plan is to make less money than your competition.

Then there's the reality that this is not an innate direct demand of memory for the sake of memory, it is intrinsically linked to these big AI companies, leading to the big question: Is this a bubble that has a risk of popping? If so, then the market will go poof before you have a single item shipped.

Even if broadly, you think the AI is viable, if any one company, especially OpenAI, gets left behind, the memory market could collapse. If not for Sam Altman's very specific purchasing commitments, the memory pressure would probably be much more modest.

Ok, fine, you are a ride or die believer in the durability of the AI boom and that every company is going to win. However, even if the AI companies do very well, what's to say they will still have the same appetite for hardware by the time this new enterprise gets going? A pivot from aggressive training to exploiting more what they have done, or some breakthrough that dramatically takes down their bloated memory requirements. If you believe in the AI boom, then just directly investing in the AI companies is the safer bet.

At the end of the day, an investor has a choice between being confident in the AI boom and investing directly in the AI companies, or being a bit less confident and investing in the memory vendors that are making bank now with a weaker, but still viable post-pop story. If you aren't comfortable directly investing in the AI companies now, then you almost certainly aren't comfortable with a long shot that only benefits if the AI boom keeps going exactly the way it has been going.

Yes, effort is underway to do this in China, but it's more about supply chain sovereignty than free market interests. It may have similar benefits, but here the free market is unlikely to be the impetus for increased supply in this scenario.