The most successful new AI frontier company's CEO is now telling the industry to stop advancing, which is wild. The push from Dario Amodei, Sam Altman, and Elon Musk is really a call for guard rails and regulation - a way to understand how fast the field should move and to get the government to explain what is possible. Development has run so fast that the labs may need to slow down. The call may also serve them: training spend has grown so large that slowing every frontier lab could help them at least reach an IPO. None of this stops the infrastructure buildout. The cat is out of the bag; AI development will not stop.
The infrastructure sits behind AI development. That gap is why so much capacity has to be built to match what the labs are making. Nobody wants to slow it too much, because the infrastructure has to be ready when needed.
How data center spending splits
For every $1 spent on a data center, about 50 cents goes to GPUs and all the ASICs, 20% goes to memory, 10% to networking, and 20% to construction, land, and everything else. Memory's share has risen from 7% two years ago to 20% now. Two reasons: inference is huge, and inference needs more memory and faster-access memory; and prices have jumped because there is not enough capacity. The industry is capacity-constrained. That is why memory stocks have become the hottest investment in the chip stack after Nvidia (NVDA), and that should continue for a few years. Yearly data center investment is running at $700-800 billion. Jensen Huang put the next three years at nearly $3 to $4 trillion going to data centers, with 20% of that headed to memory.
Korea leads, and demand is now visible for years
Korea is the number one player, with Samsung and SK Hynix (SKHY) as leaders. Korean memory exports are up about 290-300%, and imports of memory production tools are up almost 200%. They are building production because they know demand will last a long time. Micron (MU) is another name to watch.
Memory used to be a very cyclical business where you could only see three to six months out. Now Micron's (MU) sales are known for the next three years, and SK Hynix's (SKHY) for the next two to three years. These companies hold solid contracts at much higher prices with some of the best credit investors. Demand is real for many years. You can invest in these companies through ADRs, and SK Hynix (SKHY) trades in the US.
What the multi-year shortage means
The AI memory shortage could last until 2029, according to the Yorkville CEO. Samsung sits on top in DRAM and high bandwidth memory, and Micron (MU) has caught up. It comes down to capacity. Micron (MU) has the advantage of being US-based with US production, so it can produce a lot here, and it is spending heavily to expand capacity.
Micron's (MU) growth is extreme: EPS went from about $7 last year to $140 per share, and revenue could reach $300 billion in the next year or so. Samsung and SK Hynix (SKHY) will also keep investing in the US to build local capacity and avoid the supply chain problems hitting other countries. For an investor in the AI buildout, this is a must own.
HBM, Nvidia's cut, and higher consumer prices
Building fabs to make more chips takes years and carries heavy regulatory and planning hurdles. Nvidia (NVDA) cut planned memory capacity in its Vera Rubin systems - the high bandwidth memory in the next Vera Rubin chip is actually lower. That does not hurt Micron (MU) much, because aggregate demand for all these chips is higher by orders of magnitude; even with a bit less memory per chip, total demand still rises sharply. Companies are shifting from traditional, slower DRAM into HBM, since HBM is what everyone wants. The balance between those two is what to watch.
Apple (AAPL) said it will have to charge more because memory costs more. The new iPhone released this past week offers a 2-terabyte option that costs $3,200. Consumer product companies that need memory will raise prices to cover the higher cost.
Watch: a possible Micron strike
Barron's reported a possible strike looming at Micron (MU), which did not comment, with workers wanting a bigger slice of the profits. Those workers all received a $30,000 bonus last month. Whether the strike happens remains to be seen.
