RAMmageddon: Rampant Al demand is fuelling a chip crisis

SAN FRANCISCO - A growing procession of tech industry leaders, including Mr Elon Musk and Mr Tim Cook, are warning about a global crisis in the making:

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What is worrying about the trend is that prices of chips are soaring and supplies are running dry, even before the AI giants really get going with their data centre construction plans. Alphabet and Amazon just announced plans for a construction blitz in 2026 that could reach US$185 billion (S$233.5 billion) and US$200 billion, respectively.

(PHOTO: REUTERS)

A shortage of memory chips is beginning to hammer profits, derail corporate plans and inflate price tags on everything from laptops and smartphones to cars and data centres — and the crunch is only going to get worse.Since the start of 2026, Tesla, Apple, and a dozen other major corporations have signalled that the shortage of DRAM, or dynamic random access memory the fundamental building block of almost all technology - will constrain production.

Mr Cook warned that it will compress iPhone margins. Micron Technology called the bottleneck “unprecedented”.

Mr Musk got to the intractable nature of the problem when he declared Tesla is going to have to build its own memory fabrication plant.

"We've got two choices: Hit the chip wall or make a fab," he said in late January.

The fundamental reason for the squeeze is the buildout of artificial intelligence (AI) data centres. Companies like Alphabet and OpenAI are gobbling up an increasing share of memory chip production by buying millions of Nvidia's.

AI accelerators come with huge allotments of memory to run their chatbots and other applications. That has left consumer electronics producers fighting over a dwindling supply of chips from the likes of Samsung Electronics and Micron.

The resulting price spikes are starting to look a bit like the Weimar Republic's hyperinflation.

The cost of one type of DRAM soared 75 per cent from December to January, accelerating price hikes throughout the holiday quarter.