For one, they could have could have not massively scaled back consumer memory manufacturing as a matter of duty to customers. But money and greed must prevail.
Isn't it the case that public companies owe a primary legal/fiduciary duty to shareholders over customers?
The question of choice between a profitable vs unprofitable venture is easy. But yeah, to what extent is choosing profitable instead of VERY profitable a breach of duty to shareholders?
The overwhelming majority of incentives for executives is and always has been aligned with squeezing more value out of customers, in the form of increased margins, lowest possible costs with the highest prices the market will tolerate.
There are a few, I mean very few executives who stand firm on defending good faith toward customer happiness and quality. One of the only things stopping the spiral is competition. That’s why there’s an incentive to consolidate into a few massive conglomerates.
As far as I am aware, the answer to your question is ‘no’[0].
> Contrary to what many believe, U.S. corporate law does not impose any enforceable legal duty on corporate directors or executives of public corporations to maximize profits or share price. The economic case for shareholder-value maximization similarly rests on incorrect factual claims about the structure of corporations, including the mistaken claims that shareholders “own” corporations, that they have the only residual claim on the firm’s profits, and that they are principals who hire and control directors to act as their agents.
This started long ago, and is one of the best examples of “if you repeat a lie often enough eventually it’ll be widely believed”. It’s a useful tool to manipulate public opinion over a few generations. But no one would ever do such a thing, right?
Mm not really. This has been argued so many times on HN. It’s imbued in de facto case law. You’re not going to find it in legislation.
Willingly getting sued by hostile shareholders is in itself not acting in the best interest of shareholders so while it’s not in code, it’s buried in many decades of case law and in reality it reflects the maligned incentives for companies.
So your contention is that a Cornell corporate & business law professor wrote and published a book and ignored all of the de facto case law that disproved their thesis? If so, do you have a rebuttal of the thesis by another subject matter expert that you can offer as a citation?
> Willingly getting sued by hostile shareholders is in itself not acting in the best interest of shareholders
Really? So if I am a hostile shareholder demanding massive workforce reductions so I can get a $1 dividend today, even though this action will make it impossible for anyone to get a $10 dividend tomorrow, it is in the best interest of shareholders for the company to capitulate to my demand? What if other shareholders are employees? Whose best interests are served then?
I’m not contending that the cornell professor is wrong. In fact, quite the opposite really. Perhaps my point wasn’t clear. What I’m saying is that reality is fuzzy enough that a majority of the country’s CEOs (often not lawyers) continue to operate on said myth. There have been enough lawsuits, even if many end up being frivolous, the myth persists. Honestly whether or not it’s written in stone doesn’t actually matter, it’s how executives behave.
Your own citation is basically an acknowledgement of that. In particular:
> “This dogma drives directors and executives to run public firms with a relentless focus on raising stock price. In the quest to “unlock shareholder value” they sell key assets, fire loyal employees, and ruthlessly squeeze the workforce that remains; cut back on product support, customer assistance, and research and development; delay replacing outworn, outmoded, and unsafe equipment; shower CEOs with stock options and expensive pay packages to “incentivize” them; drain cash reserves to pay large dividends and repurchase company shares, leveraging firms until they teeter on the brink of insolvency; and lobby regulators and Congress to change the law so they can chase short-term profits speculating in high-risk financial derivatives.”
Oh, I understand what you are saying now. Thank you for clarifying! I agree that executives these days do seem to persist in operating according to the shareholder value myth, despite it being a myth, and despite a bunch of them seemingly admitting to knowing better in 2019[0].
That false pledge certainly suggests that rather than being controlled by the dogma, they perpetuate it so workers and citizens accept turpitude as inevitable and necessary. The carrot is the stock option; the stick is the myth that everyone will get in big trouble if workers refuse to put shareholder wealth first.
>Isn't it the case that public companies owe a primary legal/fiduciary duty to shareholders
The shareholders own the company. It is their property. They paid for it, they own it, and likewise they can do whatever they want with it.
It would be crazy if I proposed you let me drive your car to work everyday. Why? Because you own your car, it's your property, and it works for your own interest. Basically every human agrees with this logic, but somehow "the company is just focused on pleasing shareholders" escapes this.
Shareholders functionally own the company. Yeah you can't stroll inside and take a ream of copy paper because you own a few shares, but the company also cannot be sold (ownership transfered) without you getting paid for your slice.
The shareholders, via the board, hold final say over the company, it's direction, and it's alignment...because they own it.
Raid your own assets, cut costs manically so you can have a few splendid quarters with stock buyback bonanza or focus on long term value creation, which a lot of times involves giving at least a passing tought to other stakeholders such as client and employees?
The getting was great for some time for HP shareholders under Fiorina, or GE shareholders under Welch. Lots of them left the sinking ships at the right moment, but I bet that lot of the others left holding the bag, would have preferred having bought AAPL.
This is like asking how many times can a politician can break his word before people vote for the other guy.
It's more like voting for public officials. Shareholders can vote to fire a CEO if they feel he's not acting in their best interests no mattter if that's the case or not.
I'd come at this from a different angle: we still want this to be market system, so we need to make this priced into the market. How can we price this in?
I would try to solve this by making the market structure reflect the underlying difficulty: we have to decide what capacity to produce years in advance, to construct the memory fabs. So this should be a futures market, and a capacity crunch would affect short-term-futures, but leave full term futures at the same price. Because the companies supplying the memory can just construct more capacity to fill those futures at the same cost regardless of the AI demand.
ah yes, adding a futures market to a sector heavily invested in AI certainly won't lead to catastrophic over-speculation that will collapse the industry entire
Well, the best way to solve this problem keeping it a market system is if consumers band together and create a fab that will supply them.
Since almost everybody is a consumer of those companies, I do suggest we reuse the governance system we have that solves other "everybody problems".
the market can't fix this. the problem here is that the consumer market is dwarfed by big buyers. the consumer market is simply less profitable. traditionally when a market is no longer profitable enough for big businesses, it opens the room for new small businesses to step in. but that won't work here unless someone finds a way to make small fabs profitable.
I buried the lede in my suggestion. I was saying that a future would give enough time to build or expand the fab in order to fill it. This means the company can fill an arbitrarily large number of orders - both consumers and big players - because it will just build the capacity to meet it.
but if the AI RAM market is so much more profitable than the consumer RAM market, who is going to buy consumer RAM futures?
to buy consumer RAM futures i would have to predict the price the RAM can be sold at 5 or 10 years from now. that seems very risky. why would i do that instead of buying AI RAM instead?
I think the epic mistake was made by investors and executives who bought tales about imminent super-intelligence about to displace millions of knowledge workers from entire industries replacing them with AI datacentres.
These people are the main reason why AI companies have unlimited funding, and can afford to buy global RAM supply for years in the future despite their expenses exceed revenue by billions.
antitrust law can be a great tool if the government actually uses it for enforcement, which it hasn’t been because it causes parties to lose elections.
Which is weird because how is "making a pile of money of billions of dollars to put millions of people out of a job" not worth an antitrust case?
It’s not worth an antitrust case when the people who have the power to stop an antitrust case gain a significant percentage of that pile of billions of dollars but I find it depends on who you ask.
How does buying long term put options require perfect timing? The whole point of a long term put option is that you only have to be right at some point between when you buy it and when it expires.
No, put options suffer from time decay and IV crush. A $1,000 MU put for December 2027 was at about $200 today. So if Micron dropped tomorrow, you'd probably start making a bit of money, although the delta is only -0.32. But if you held all the way to December 2027, Micron would then have to drop all the way to $800 before your position is profitable.
When and how that transition happens is subject to a number of complex factors, and it's not even necessarily the case that incremental drops in the stock will produce incremental gains for your put option.
This is a really bizare argument for anyone who actually knows about options and trades them. If your thesis is that RAM is in a massive bubble and Micron is going to crash when it bursts, you don't express that thesis by buying a put struck around Micron's current bubble price. The fact that you chose a $1000 strike as your example is weird because that's basically the most expensive way to make the argument you're supposedly making.
"IV crush" is an especially strange objection in this context. IV crush matters when you buy options at elevated implied volatility and that volatility collapses. If Micron suddenly drops hundreds of dollars because the alleged bubble is bursting then the implied volatility would sharply rise, which makes your put more valuable, not less. Invoking "IV crush" here mostly makes it sound like you've heard the terminology without thinking through how it actually applies to the scenario you're describing.
If you genuinely think Micron is going to collapse sometime over the next two or three years because this entire RAM shortage is an overhyped bubble, then the obvious trade is to buy puts around where you think the stock should return to once that bubble disappears. Micron wasn't remotely a $1000 stock before this run. We can be generous and use a $300 strike since even though that's still 100% higher than Micron's price prior to this run-up, it gets the point across.
A long dated $300 put is currently around $7 per share, so one contract costs roughly $700. If Micron eventually falls to $200, that contract is worth $10000 at expiry. At $100, it's worth $20000. If the crash happens well before expiry, it can be worth even more than its intrinsic value because there's still time value left.
If you're claiming to be certain that a gigantic bubble is going to burst and wipe hundreds of dollars off the stock price, there are long dated far out of the money puts specifically capable of expressing that position. Pointing at an expensive $1000 strike put and saying "look, options are complicated" is just a weird or rather superficial misunderstanding of some financial concepts.
None of that helps you get memory now. You're not going to see your payoff for 2-3 years or whenever the bubble bursts. At which point the bubble has burst and you can simply buy ram at a normal price again. And the thesis of this discussion is that we can't buy memory at a reasonable price now, not 3 years from now.
This isn't an abstract discussion about the usefulness of options trading or other hedging strategies. You want to pay for ram today by betting on returns years in the future? Risky play! Hope you can stay solvent.
I personally use options for hedging, which I think is generally the responsible purpose of them.
It's true that you can get something like a directional bet by going far enough out of the money with strong enough conviction never to exit the position early. But this also exposes you to a lot of risk that it might not pay off even though the original idea was correct. Microsoft crashed in 2000, but it never returned to its pre-1998 price, because there was some real value in the dotcom bubble and they were able to capture a disproportionate fraction of it.
The point of LEAPS is you don’t have to perfect the timing. You buy far enough out to avoid theta decay, and far enough out of the money to minimize risk.
Regardless of timing, for shorts to pay out requires the market to actually correct itself. You won't be able to get your magical shorts money until the price of ram goes back down anyway. The market will remain irrational longer than you can remain solvent.
The price of RAM does not need to come down in order for a way-out-of-the-money January 2027 put on NVDA to increase in value from its current purchase price.
Google (which is diversified more and whose performance is less likely to track AI outcomes closely) aside, the two other members of the AI Big 3 are non-public, so, no, you really can’t.
If you could afford a computer at pre-AI prices (which is presumably what you're complaining about? If you couldn't afford a computer before, AI hasn't changed that for you), you have enough money to put where your mouth is.
You can make a lot of money with shorts if you are correct about when the market will move. If you think that the market is overestimating the real value you have not even half of the puzzle.
The same thing was said 4 years ago about NVIDIA on HN, that it's stock it's outrageously overpriced, given it's $20 bln revenue, that it should have at least 10 times more revenue to justify that stock price, which is fantasy, that there is no plausible way for such demand no matter what you think about GPT-2.
nVidia earning is way above zero by a healthy margin. This was also true 4 years ago. How much their shares should cost is debatable but still, nVidia is obviously a profitable business.
Anthropic net loss in 2025 was $42 bln, OpenAI $38.5 bln. Both are spending enormous amounts with no obvious path to profitability.
> How should the memory companies have acted differently?
Same way nVidia did through the crypto insanity - make sure they're supplying enough to the consumer market so it doesn't get completely destroyed and pulls down the other parts of the consumer market they're reliant for long term success.
> Should we blame this on memory companies or the AI companies bidding for memory?
Blame doesn't change the outcomes, neither does it improve the negative consequences. Think in terms of "what does destruction of our consumer market mean for my prosperity?" not "oh, how do defend poor companies again?"
glimshe · · focus · HN ↗
SlightlyLeftPad · · focus · HN ↗
Cyan488 · · focus · HN ↗
The question of choice between a profitable vs unprofitable venture is easy. But yeah, to what extent is choosing profitable instead of VERY profitable a breach of duty to shareholders?
micromacrofoot · · focus · HN ↗
avoiding the destruction of good faith with consumers is a legitimate business interest
pessimizer · · focus · HN ↗
[deleted] · · focus · HN ↗
[deleted]
SlightlyLeftPad · · focus · HN ↗
There are a few, I mean very few executives who stand firm on defending good faith toward customer happiness and quality. One of the only things stopping the spiral is competition. That’s why there’s an incentive to consolidate into a few massive conglomerates.
micromacrofoot · · focus · HN ↗
csnover · · focus · HN ↗
> Contrary to what many believe, U.S. corporate law does not impose any enforceable legal duty on corporate directors or executives of public corporations to maximize profits or share price. The economic case for shareholder-value maximization similarly rests on incorrect factual claims about the structure of corporations, including the mistaken claims that shareholders “own” corporations, that they have the only residual claim on the firm’s profits, and that they are principals who hire and control directors to act as their agents.
[0] <a href="https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-value-myth/" rel="nofollow">https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-v...
Henchman21 · · focus · HN ↗
SlightlyLeftPad · · focus · HN ↗
Willingly getting sued by hostile shareholders is in itself not acting in the best interest of shareholders so while it’s not in code, it’s buried in many decades of case law and in reality it reflects the maligned incentives for companies.
csnover · · focus · HN ↗
> Willingly getting sued by hostile shareholders is in itself not acting in the best interest of shareholders
Really? So if I am a hostile shareholder demanding massive workforce reductions so I can get a $1 dividend today, even though this action will make it impossible for anyone to get a $10 dividend tomorrow, it is in the best interest of shareholders for the company to capitulate to my demand? What if other shareholders are employees? Whose best interests are served then?
SlightlyLeftPad · · focus · HN ↗
Your own citation is basically an acknowledgement of that. In particular:
> “This dogma drives directors and executives to run public firms with a relentless focus on raising stock price. In the quest to “unlock shareholder value” they sell key assets, fire loyal employees, and ruthlessly squeeze the workforce that remains; cut back on product support, customer assistance, and research and development; delay replacing outworn, outmoded, and unsafe equipment; shower CEOs with stock options and expensive pay packages to “incentivize” them; drain cash reserves to pay large dividends and repurchase company shares, leveraging firms until they teeter on the brink of insolvency; and lobby regulators and Congress to change the law so they can chase short-term profits speculating in high-risk financial derivatives.”
csnover · · focus · HN ↗
That false pledge certainly suggests that rather than being controlled by the dogma, they perpetuate it so workers and citizens accept turpitude as inevitable and necessary. The carrot is the stock option; the stick is the myth that everyone will get in big trouble if workers refuse to put shareholder wealth first.
[0] <a href="https://en.wikipedia.org/wiki/Business_Roundtable#2019_corporation_pledge" rel="nofollow">https://en.wikipedia.org/wiki/Business_Roundtable#2019_corpo...
WarmWash · · focus · HN ↗
The shareholders own the company. It is their property. They paid for it, they own it, and likewise they can do whatever they want with it.
It would be crazy if I proposed you let me drive your car to work everyday. Why? Because you own your car, it's your property, and it works for your own interest. Basically every human agrees with this logic, but somehow "the company is just focused on pleasing shareholders" escapes this.
dcrazy · · focus · HN ↗
WarmWash · · focus · HN ↗
The shareholders, via the board, hold final say over the company, it's direction, and it's alignment...because they own it.
izacus · · focus · HN ↗
elzbardico · · focus · HN ↗
Raid your own assets, cut costs manically so you can have a few splendid quarters with stock buyback bonanza or focus on long term value creation, which a lot of times involves giving at least a passing tought to other stakeholders such as client and employees?
The getting was great for some time for HP shareholders under Fiorina, or GE shareholders under Welch. Lots of them left the sinking ships at the right moment, but I bet that lot of the others left holding the bag, would have preferred having bought AAPL.
torginus · · focus · HN ↗
It's more like voting for public officials. Shareholders can vote to fire a CEO if they feel he's not acting in their best interests no mattter if that's the case or not.
CBLT · · focus · HN ↗
I would try to solve this by making the market structure reflect the underlying difficulty: we have to decide what capacity to produce years in advance, to construct the memory fabs. So this should be a futures market, and a capacity crunch would affect short-term-futures, but leave full term futures at the same price. Because the companies supplying the memory can just construct more capacity to fill those futures at the same cost regardless of the AI demand.
paimapi · · focus · HN ↗
marcosdumay · · focus · HN ↗
Since almost everybody is a consumer of those companies, I do suggest we reuse the governance system we have that solves other "everybody problems".
em-bee · · focus · HN ↗
CBLT · · focus · HN ↗
em-bee · · focus · HN ↗
to buy consumer RAM futures i would have to predict the price the RAM can be sold at 5 or 10 years from now. that seems very risky. why would i do that instead of buying AI RAM instead?
swdev281634 · · focus · HN ↗
These people are the main reason why AI companies have unlimited funding, and can afford to buy global RAM supply for years in the future despite their expenses exceed revenue by billions.
amelius · · focus · HN ↗
SlightlyLeftPad · · focus · HN ↗
amelius · · focus · HN ↗
SlightlyLeftPad · · focus · HN ↗
benced · · focus · HN ↗
swdev281634 · · focus · HN ↗
demibabs · · focus · HN ↗
Shorting doesn’t only require you to be right. It requires perfectly timing when the market will realize you’re right.
dist-epoch · · focus · HN ↗
philipov · · focus · HN ↗
Maxatar · · focus · HN ↗
SpicyLemonZest · · focus · HN ↗
When and how that transition happens is subject to a number of complex factors, and it's not even necessarily the case that incremental drops in the stock will produce incremental gains for your put option.
Maxatar · · focus · HN ↗
"IV crush" is an especially strange objection in this context. IV crush matters when you buy options at elevated implied volatility and that volatility collapses. If Micron suddenly drops hundreds of dollars because the alleged bubble is bursting then the implied volatility would sharply rise, which makes your put more valuable, not less. Invoking "IV crush" here mostly makes it sound like you've heard the terminology without thinking through how it actually applies to the scenario you're describing.
If you genuinely think Micron is going to collapse sometime over the next two or three years because this entire RAM shortage is an overhyped bubble, then the obvious trade is to buy puts around where you think the stock should return to once that bubble disappears. Micron wasn't remotely a $1000 stock before this run. We can be generous and use a $300 strike since even though that's still 100% higher than Micron's price prior to this run-up, it gets the point across.
A long dated $300 put is currently around $7 per share, so one contract costs roughly $700. If Micron eventually falls to $200, that contract is worth $10000 at expiry. At $100, it's worth $20000. If the crash happens well before expiry, it can be worth even more than its intrinsic value because there's still time value left.
If you're claiming to be certain that a gigantic bubble is going to burst and wipe hundreds of dollars off the stock price, there are long dated far out of the money puts specifically capable of expressing that position. Pointing at an expensive $1000 strike put and saying "look, options are complicated" is just a weird or rather superficial misunderstanding of some financial concepts.
philipov · · focus · HN ↗
This isn't an abstract discussion about the usefulness of options trading or other hedging strategies. You want to pay for ram today by betting on returns years in the future? Risky play! Hope you can stay solvent.
SpicyLemonZest · · focus · HN ↗
It's true that you can get something like a directional bet by going far enough out of the money with strong enough conviction never to exit the position early. But this also exposes you to a lot of risk that it might not pay off even though the original idea was correct. Microsoft crashed in 2000, but it never returned to its pre-1998 price, because there was some real value in the dotcom bubble and they were able to capture a disproportionate fraction of it.
eudamoniac · · focus · HN ↗
dcrazy · · focus · HN ↗
philipov · · focus · HN ↗
dcrazy · · focus · HN ↗
tom_alexander · · focus · HN ↗
dcrazy · · focus · HN ↗
[deleted] · · focus · HN ↗
[deleted]
dragonwriter · · focus · HN ↗
BLKNSLVR · · focus · HN ↗
Can't afford thing? Gamble on stock market instead.
Ridiculous argument that already rich people make.
benced · · focus · HN ↗
vor_ · · focus · HN ↗
rcxdude · · focus · HN ↗
dist-epoch · · focus · HN ↗
swdev281634 · · focus · HN ↗
Anthropic net loss in 2025 was $42 bln, OpenAI $38.5 bln. Both are spending enormous amounts with no obvious path to profitability.
elzbardico · · focus · HN ↗
iwontberude · · focus · HN ↗
[dead]
micromacrofoot · · focus · HN ↗
memory companies could have attempted to protect consumers, at least a little, but the AI money machine goes brrrr
amelius · · focus · HN ↗
Well if your thesis is that they should have acted differently, then we should blame the laissez-faire capitalists.
izacus · · focus · HN ↗
Same way nVidia did through the crypto insanity - make sure they're supplying enough to the consumer market so it doesn't get completely destroyed and pulls down the other parts of the consumer market they're reliant for long term success.
> Should we blame this on memory companies or the AI companies bidding for memory?
Blame doesn't change the outcomes, neither does it improve the negative consequences. Think in terms of "what does destruction of our consumer market mean for my prosperity?" not "oh, how do defend poor companies again?"
VCFundedGenYer · · focus · HN ↗