Gil Faizon

I came across an interesting analysis today. It argued that while the unwinding of leveraged positions has contributed to the recent decline in memory stocks, the market is also beginning to price in the prospect of future supply expansion. The argument goes as follows. Even if the memory shortage persists throughout 2027, research firms, sell-side analysts, and other prominent industry observers broadly agree that the supply-demand imbalance will begin to ease in 2028. Given that Samsung Electronics and SK hynix have announced massive fab expansion plans—and that other memory manufacturers are also racing to expand capacity—it seems reasonable to conclude that the market has already begun pricing in the increase in supply expected from 2028 onward. There is a well-known rule of thumb when it comes to memory stocks: share prices tend to anticipate the peak in memory prices by about two quarters. But something I have long wondered—and perhaps deliberately tried to ignore—is whether that anticipation necessarily has to be limited to two quarters. Is it really impossible for the market to price in the peak three or even four quarters in advance? I found this analysis extremely interesting. More importantly, I found it quite convincing.

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GilFaizon8 retweeted

Jukan

@jukan05

8 days ago

However, all of these assumptions begin with the same premise: that a flood of new supply will arrive in 2028 and cause memory prices to collapse. The analysis I read made the following argument. Since the 1980s, memory prices have never fallen because demand declined. Demand continued to grow during the PC era, the smartphone era, and the cloud era. Every major collapse in memory prices has been caused by supply. I agree. If Big Tech eventually lacks the financial capacity to absorb all the available memory, a new wave of consumer AI innovation will emerge to absorb it instead. Perhaps memory prices will first need to fall before that consumer AI innovation can take place. But that is a chicken-and-egg problem, not the central issue we are discussing here. The analysis then went on to say this: everyone who has ever argued that “this time is different” in the memory industry has eventually been proven wrong. Yet there are several reasons why this time might actually be different. One is the growing use of LTAs, although many people remain skeptical of them, so I will set that aside. The more important point is that in today’s AI industry, as P falls, Q increases by much more than P declines. A paper by Zhang and Zhang titled The Economics of Digital Intelligence Capital was posted on arXiv in January 2026. It estimates the price elasticity of demand for AI tokens at 1.42. In other words, a 1% decline in price leads to a 1.42% increase in volume. The crucial point is that the elasticity is greater than one. When that is the case, falling prices can actually increase total industry revenue. The paper models a scenario in which API prices are cut in half. Token consumption does not rise linearly; it accelerates in a convex fashion as developers begin adopting more compute-intensive inference architectures. What matters here is that elasticity does not prevent a price collapse. It reduces the damage caused by that collapse. Suppose DRAM selling prices fall by 30%. In the old world, shipment volumes would barely increase. Revenue would then fall by 24%, and because costs would remain largely unchanged, margins would collapse from 60% to below 25%. That is what happened in 2019, when Samsung Electronics’ operating profit fell by 52.8%. In an AI-driven world, however, an elasticity of 1.42 means that volume rises by 42%. Assume that production costs also decline by roughly 15% through process migration. Revenue then remains almost unchanged, margins fall from 60% to 36%, and profit declines by only 15%. Negative 52.8% versus negative 15%. That difference lies at the heart of whether memory companies deserve to trade at more than five to six times earnings.

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Gil Faizon @GilFaizon8

9 days ago

@pokehuntdotfun Opening anything you fucking send me bruh

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Declaration of Memes

@LibertyCappy

12 days ago

Remember this! 💯

Gil Faizon @GilFaizon8

12 days ago

@EndicottInvests Yo, you are losing it bro 😂 you realize NBIS is currently building one there? Also, seems like the biggest city in this country would need a few data centers. But it seems like you have figured it all out

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Gil Faizon @GilFaizon8

12 days ago

@EndicottInvests Ever care about short float

Gil Faizon @GilFaizon8

12 days ago

@MrJulius007 @EndicottInvests I have a position as well, but this dude is just a degen. No actual alpha, doesn’t even do research before he says something. But he swears he knows everything. lol 8 years experience. Siiiick bro.

Gil Faizon @GilFaizon8

12 days ago

@EndicottInvests @angeliclucero They do have data centers there, but sweet research.

Gil Faizon @GilFaizon8

12 days ago

@EndicottInvests Based on your comments/posts, you could have fooled me. What do you call someone who thinks they are smarter and/or more experienced than someone who has more than double the experience? Keep being sarcastic, it’s getting you places.

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Gil Faizon @GilFaizon8

12 days ago

@EndicottInvests Its pretty much investing 101 actually. A big mistake people like you make all the time is thinking you know more than a random me. But keep hammering away at NBIS. It’s really smart to concentrate everything into one name, especially one that is in kahoots with Russian oligarchs