The AI CapEx bubble is peaking
The guest argued that the AI bubble is concentrated on the capital expenditure side rather than the technology itself, signaling a looming reversal in the DRAM cycle.
The argument
The guest pointed out that hyperscalers like Oracle and Meta are spending unsustainably high percentages of their revenue on CapEx. He argued that while the demand for compute is linear, the pricing of highly commoditized products like DRAM will inevitably decline, leading to a crushing of earnings for memory manufacturers over the next couple of years.
The thesis, stress-tested
✓ What validates it
- ✓A decline in DRAM contract pricing
- ✓A contraction in gross margins for major memory manufacturers in upcoming quarterly reports
▸ Risks discussed
- ▸Bulls argue that supply constraints will persist until 2027 or 2028, keeping margins high
- ▸Volume demand for data centers could continue to outpace historical linear trends
Hear it yourself
"The the bubble is clearly in the CapEx side. You can be sure in the next couple years, this DRAM cycle will reverse. I I think debts and deficits now matter. Markets are choking on excess supply for the first time in my lifetime."
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