I wonder why the hyperscalers aren't vertically integrating more and building their own fabs. Sure, a fab costs a billion dollars, but they're currently spending hundreds of billions of dollars purchasing chips from NVidia and others.
I'm not sure if they should vertically integrate, it would probably be a better idea to directly fund the expansion of capacity, much like Apple does when they scale up a new technology for iPhones.
However, that the hyperscalers and AI companies aren't doing this says a lot about their true beliefs about how much future demand AI will have.
AI companies claim they will need a ton of massive expansion, but are unwilling to take on the risk of the capital needed for that expansion.
I'm hearing a lot of sad whining from AI folks about how these chip makers are holding them back, but who actually has the money to finance the expansion easily? Chip makers have been through this game far longer, when Sam Altman went around claiming it was time for $7T of fabs the AI companies made it clear that they were willing to make ridiculous claims, eliminating credibility.
What's needed now is for them to funnel a tiny amount of their massive piles of cash into financing fabs directly.
Oracle is getting sold because of how much capex they're spending on new data centers in the middle of a high rates environment. It's not like they're stockpiling cash due to doubting AI.
Oracle had not entered into my thoughts at all; I know they do some cloud stuff but they are in a very different position than OpenAI or Anthropic or Google.
> [...] better idea to directly fund the expansion of capacity [...]
>
> However, that the hyperscalers and AI companies aren't doing this says a lot about their true beliefs about how much future demand AI will have.
With what money? They have to spend the money they get on hardware ASAP else they are left behind.
Because fabs are about the most complex cutting edge technology out there: the "rocket science" of our day (or one of them). And merely having the money is not sufficient. It would be very easy to blow several billion dollars and end up with nothing to show for it.
Just look at how Intel has struggled to compete in recent years, and they have been in the business for decades.
Intel struggled because they bet the company that Moore's law was over back in ~2014, and instead of upgrading their fabs to EUV they sent the money back to shareholders.
They forgot Moore's main lesson: only the paranoid survive. They thought they could coast, and it nearly killed them.
Yes, their primary "bad" decision was to try to squeeze as much as possible out of DUV so that they didn't have to spend a ton of money upgrading to EUV.
This was a business decision, not an engineering decision.
A fab takes years to build even when you have the necessary know-how. If you don't it'll take some additional experimenting before you can compete with the established manufacturers. By the time you can produce a usable chip the shortage might be over.
Another guy answered it ITT. Intel did that, it’s not great because fabs are expensive and risky and it’s less risky to amortize the cost across multiple customers instead of just yourself
Fab margins are on average super thin compared to the margins of big tech companies, and come with a lot of risk because of that. It's not something they are likely to be keen to integrate.
