At this point it’s become so screamingly obvious that the hyperscalers are drowning in GPU silicon that they can’t plug in that even the corporate press is noticing.

Credit to Ed Zitron (@edzitron on X) for being the loudest voice in the room on this subject early on.

But the question becomes why? Why did these super-smart people order so much of the most expensive silicon ever made that it’s piling up in warehouses and dark data center space? Microsoft, Amazon, and Google know the data center construction business quite well.

They knew there would be power issues.

But they bet big and bought anyway.

There’s a rational reason (still for very speculative values of “rational”).

And the company behind that reason is Apple, even though Apple is the one big tech firm that didn’t play the “buy infinite GPUs game.” Sound crazy? No, it makes perfect sense.

A Few Very Brief Paragraphs on Semi Fab Economics: Bleeding-edge semiconductor fabs are bleedingly-expensive to build.

TSMC’s 2N (the best of the best, right now) and 3N (best of the best, two years ago) fabs cost around $20 billion each.

Because construction costs are so extreme, downtime for any reason (gotta pay off that investment!) costs an average of around $2 million per hour.

Financially, it is survival-level important that TSMC keep these fabs booked solid and running as close to 24/7/365 as humanly possible.

There are two reasons a fab might stop running: Equipment malfunction.

It happens, because these fabs involve sticking their toes over the edge of human understanding of physics and materials science.

The engineers that build and calibrate them write off a decent percentage of success to straight-up witchcraft.

Even so, at $2 million per hour if something breaks you can imagine the screaming.Not enough orders booked.

This is where our focus is.

TSMC cannot have downtime on these fabs due to lack of orders.

Fortunately, right now there is practically infinite demand and production runs are sold in advance.

Way, way, in advance.

This is not always the case, which will become important later.

But right now, if you’re getting a GPU built on N2 technology it’s because you placed the order about three years ago.

For N3 (the previous generation) it’s a little bit looser: you placed the order about two or two-and-a-half years ago.

TSMC might allow small adjustments over this period, but for practical purposes orders placed are “take-or-pay.” Even so, this alone doesn’t explain the absolute flood of GPUs.

Again, Microsoft, Amazon, and Google (and probably Oracle, SpaceXAITeslaSolarCity, etc.) knew they were not going to be able to power them and they all bought anyway.

The neoclouds just signed while trying not to drool on the documents.

And Now On to the Why: Zitron speculated that Jensen Huang is twisting their arms so hard that they’re continuously buying stuff they don’t need.

This doesn’t sit with me, and doesn’t explain why other vendors and internal products like Amazon’s Tranium GPUs are overproduced as well.

Here’s a far more realistic reason as to why they did it: Even years in advance you couldn’t just roll up to TSMC with a pile of cash and place an order on N2 when it was brand new or N3 when it was the hotness, because prior to the AI madness everyone knew good and well that the first 9-12 months of production on any new TSMC process are the property of Apple.

This goes back many years, to when Apple moved from Samsung (a competitor) to TSMC for chip manufacturing.

Apple’s CPUs are known for completely annihilating their competitors in the markets they target.

It’s not even close.

Comparisons are not so much benchmarking as they are humiliation rituals.

Part of this is because Apple’s silicon design teams are just that good.

The other part is because Apple placed a monstrously huge financial bet on TSMC’s ability to perform the witchcraft necessary to make new processes work (an area where Intel struggled horribly for many years and nearly bankrupted the company).

Apple completely bought out the first year or so....