Rising DRAM prices may hit consumers

ARTIFICIAL intelligence (AI) is going to shape the future of the world, including Malaysia, in time to come. AI is going to require not only large quantities of power, but also significant computing power.

AI-powered chips have driven the share prices of companies such as Nvidia sharply higher, but the appetite for AI is now spilling over into other parts of the computing world, with costly consequences in the immediate term.

Of late, dynamic random-access memory (DRAM) prices have risen at an “exponential” rate ever since AI companies such as OpenAI entered into deals to secure large quantities of DRAM from leading manufacturers for their computing needs.

DRAM is present in everyday electronics – from phones to laptops – and the humungous spike on DRAM prices, if it lasts in a highly cyclical industry, is going to spike the price of everyday electronics if manufacturers cannot absorb the increase.

Manufacturers will surely pass on these higher DRAM costs and that is going to lead to a pinch among consumers who purchase such electronics for everyday use.

DRAM prices have spiked upwards in the past, only to return to normal as manufacturers take advantage of high prices to increase output.

We saw a similar pattern in the rubber glove industry, although that surge was driven by pandemic-related demand.

The AI boom, however, is creating an ongoing demand spike for graphics processing units and DRAM – a structural shift that may reshape the industry far more significantly than the temporary, disease-driven shock in the glove sector.

So, the next time electronic goods suddenly spike in price, we may have a clearer idea of why.