Ray Wang on How AI Is Causing DRAM Prices to Surge

R. "Ray" Wang (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, you know what I'm worried about? I don't know if I'm worried about it, but it kind of feels like the direction things are going, which is that all energy, industrial commodities, anything that we use for any purpose is just going to feed the AI beast, and us humans, we're just gonna get left out in the cold. Nothing for you, we got to feed it all to the AI, and maybe in 10 or 20 or 50 years, the AI is so powerful, they just decide, why do humans get any of this? We just, we should keep it all to ourselves.

Tracy Alloway (0:57)

A legitimate concern, I would say. I mean, to some extent, we are already seeing this crowding out effect, right? So energy prices in certain areas have been going up, and most recently, memory chip prices. So this has been all over earnings recently, right? You had companies like Apple saying that because of a crunch in memory chip supply, they might have to either raise their prices or like cut down on the amount of phones they use. Nintendo, like if you pull up a chart of Nintendo shares right now, they are just getting hammered, and supposedly it is all because of this memory chip shortage. By the way, do you remember, do you remember like buying your first PC in like, you bought one before I did, I think, but mine was in the mid 90s?

Joe Weisenthal (1:43)

Yeah, yeah, I think that's about when I got one.

Tracy Alloway (1:45)

Do you remember how much memory those things had?

Joe Weisenthal (1:48)

Oh, like nothing.

Tracy Alloway (1:48)

Yeah, like I looked it up, something like less than 10 megabytes for a bunch of them. You know how much PCs have nowadays?

Joe Weisenthal (1:55)

Actually, I have no idea.

Tracy Alloway (1:57)

I think it's, let's see, 16 gigabytes.

Joe Weisenthal (2:00)

Yeah.

Tracy Alloway (2:01)

Isn't that crazy?

Joe Weisenthal (2:02)

It is really crazy. I remember, like, do you remember Zip drives? Yeah.

Tracy Alloway (2:06)

Oh, my God.

Joe Weisenthal (2:07)

Or like, and these were all these special, you know, obviously various memory peripherals that you could buy, and they came in sort of dedicated cartridges and stuff like that. I think they were called Zip drives. Yeah, I think, right? They were Zip drives. I don't remember.

Tracy Alloway (2:20)

Yeah, it was. Yeah, that's right.

Joe Weisenthal (2:21)

Buying additional memory storage, etc. used to be this big part of the consumer process. I'm actually glad, you know, my son really wants a Nintendo, but if they can't produce them anymore because they can't get the memory, then I'll say sorry. No video games.

Tracy Alloway (2:34)

That's so mean. You're going to have to sit him down and be like, I'm so sorry, son. There's this thing called the supply shortage. I'm going to use this as a learning opportunity to explain how global supply chains actually work.

Joe Weisenthal (2:45)

Totally. You know what the one interesting thing is, if you look at spot DRAM prices, which we have on the terminal, this is, I think, maybe the interesting dynamic. There's a lot of AI-related things on the terminal that have been surging for several years, most notably some of the big chip companies, Nvidia, etc.

If you look at a chart of spot DRAM prices, the big surge wasn't until late last year, and since then, it's gone nuts. So for a long time, even as this AI story, the AI meme, the AI industry propagated, people were really paying attention to that area. Then suddenly, it's just gone like haywire. Yeah. So obviously, huge supply-demand imbalances. We need to understand what's going on, because I think the stakes are getting so much. As you mentioned, a lot of companies are losing out pretty big. Others are making a lot of money. We need to get a handle on what's going on with memory.

Tracy Alloway (3:36)

Let's do it.

Joe Weisenthal (3:36)

I'm really excited to say, we really do have the perfect guest. We are going to be speaking with Ray Wang. He's an analyst at SemiAnalysis, and he's recently published a brand new report on exactly this topic, talking about a memory super cycle and so forth. So truly the perfect guest, as I mentioned. He comes to us from Korea. Ray, thank you so much for coming on Odd Lots.

R. "Ray" Wang (3:59)

Hey, nice to meet you both, and thanks for having me.