AI Insiders Are Preparing For The Bubble To Burst
And it aligns with OpenAI's predicted demise.
There are so many signs that the AI industry exists in the mother of all bubbles that it can be hard to see the forest for the trees. For example, the total lack of productivity growth, zero GDP growth from AI, OpenAI’s own research on the limitations of today’s models, and the countless studies that show just how useless these machines are. But possibly the most interesting is the recent revelation that AI insiders, who arguably profit the most from this bubble, are preparing for the entire thing to collapse in just a few years. This isn’t as significant a red flag as it sounds. Businesses make such contingencies. But it is a deeply insightful piece of context that reframes the entire AI hype train.
To explain why this revelation is so important, we need to recap a few things.
As I have covered before, the AI industry is currently neck-deep in circular financing. AI companies like OpenAI, AI hardware operators like Amazon or Coreweave, and AI hardware suppliers like Nvidia are funding each other to the tune of hundreds of billions of dollars in a large-scale corporate circle jerk to increase each other’s value and prevent loss-making AI labs from collapsing. For example, Nvidia and Amazon recently gave OpenAI tens of billions of dollars, but in return, OpenAI will use almost all this money to buy their AI chips and use their AI data centres. Unfortunately, OpenAI’s annual losses are only growing, as its models become more and more expensive to train and operate. So it needs a constant flow of these gargantuan cash injections to stave off bankruptcy. In other words, established data centre giants like Nvidia and Amazon are funding colossal, unprofitable AI companies to drive up demand for their hardware, operations, and sales and, in turn, increase their share value.
When viewed through this lens, the AI bubble could be seen as Big Tech using AI to grift the economy and increase its value.
Now, admittedly, AI companies like OpenAI have other sources of financing, such as debt. But they can only rack up so much debt before it completely decimates them. As such, this drive to increase demand for AI data centre sales and operations through circular financing is mainly responsible for the AI bubble.
Why does that matter? Because it has caused the RAMpocalypse.
AI infrastructure requires truly enormous amounts of high-speed computer memory. This has caused demand for high-speed memory such as DRAM, VRAM and HBM to skyrocket over the past year and a bit. Sadly, production of these chips is slow to expand, causing demand to significantly outstrip supply and prices to explode. Tech enthusiasts have labelled this the “RAMpocalypse”, as the consumer computer component most affected by these insane price hikes is RAM. Some variants of consumer RAM have increased in price by 500% over just three months!
Those inside the AI circular financing bubble are not the manufacturers of these chips. In fact, there are only three main manufacturers involved: Samsung, SK Hynix, and Micron, and they sell the chips to companies like Nvidia. All three are set to make record profits from these price spikes and arguably might be the ones profiting the most from the AI boom, with them set to pocket around half a trillion dollars. Selling shovels in a gold rush and all.
Now, all three manufacturers are trying to expand production to meet this higher demand. SEMI forecasts that overall 300mm wafer output (used to make these types of memory) is set to increase at a 7% annual growth rate from late 2024 through 2028. But, when you consider that new AI data centres are predicted to use 70% of the memory chips produced in 2026 and that we are expected to deploy exponentially more AI data centre capacity each year until long beyond 2030, that supply increase likely can’t keep up with demand.
Simply put, the AI bubble is directly causing the RAMpocalypse. If the AI bubble continues to grow, the RAMpocalypse will follow in its footsteps. But the opposite is also true. If the AI bubble pops, then the RAMpocalypse will end because memory demand will crash.
And guess who knows that? These memory manufacturers.
