Key insights
- The post highlights four risks to the semiconductor and memory boom: efficiency improvements in AI models reducing memory demand, China's potential entry into the HBM market, companies scaling back AI spending due to high costs, and construction/grid constraints causing delays. These factors could negatively impact demand and pricing power for Western semiconductor companies, particularly memory stocks.
Highlighting 4 potential risks for the boom in memory stocks and semis. Memory stocks are most exposed here.
1. Efficiency Improvements: If frontier models figure out how to run agentic AI with 80% less KV cache or memory overhead, the shortage disappears.
2. China Supply: If they successfully mass-produce High Bandwidth Memory or even flood the mid-range market, the Western companies lose pricing power.
3. Companies Scale back on AI Spend: Cost of running AI at companies is exploding. As of now, AI first is more expensive than the old human + SAAS stack.
4. Construction Delays and Grid Constraints: Physical construction and grid/regulatory problems are already causing delays.
I'm not saying this will happen, but all of the above are at least somewhat likely to happen and would have a massive impact on demand or supply. Be careful out there.