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Amazon Raised the Price of an Echo Dot From $50 to $80 Overnight, and the Reason Is the AI Data Centers · Minds, Bodies, and Terawatts

• 0:00
  [Host] This is Minds, Bodies, and Terawatts, the show where the AI boom finally showed up on a price tag in your kitchen. Fortune reported Friday that Amazon raised prices across its entire first-party hardware line overnight, with no announcement, and the base Echo Dot went from fifty dollars to eighty.
• 0:17
  [Guest] The Echo Dot was the thing you threw in the cart without thinking. At eighty dollars it's a decision. Amazon's explanation to Fortune was a single phrase: significant increases in memory and storage component costs.
• 0:29
  [Host] Why the cheap stuff first? I'd have guessed the expensive gear takes the hit.
• 0:33
  [Guest] A flagship phone has margin to absorb it. An eighty-dollar speaker doesn't. And budget devices run plain commodity memory, which is exactly what the data centers are buying.
• 0:43
  [Host] We covered this in June, when Tim Cook called the memory crunch a hundred-year flood and we pointed at the next iPhone.
• 0:51
  [Guest] Right about the mechanism, wrong about the target. It landed early, on the cheapest thing in the house. Amazon runs the best supply chain in retail, so this wasn't one company negotiating badly.
• 1:02
  [Host] Is this a spike I wait out, or the new normal?
• 1:06
  [Guest] Jaejune Kim runs Samsung's memory business. On the company's second-quarter earnings call in July he said, quote, the supply shortage in 2027 is expected to worsen compared to this year, and it is expected to continue in 2028.
• 1:19
  [Host] Samsung sells the memory. They're telling their own customers it gets worse before it gets better?
• 1:24
  [Guest] Kim also said the long-term deals being signed now carry upfront payments and price floors, and will eventually cover most of Samsung's output. Past cycles were demand you could cancel. This is demand that signed a contract.
• 1:37
  [Host] How big a repricing?
• 1:38
  [Guest] JPMorgan estimates DRAM prices up more than four hundred percent from the start of 2024 through the end of this year.
• 1:45
  [Host] Set that against the history for me.
• 1:48
  [Guest] For about fifty years, memory got roughly ninety percent cheaper every five years. That curve is the dividend nobody had to ask for: the machines get better, everything they touch gets cheaper. It's why the phone in your pocket outruns the computer that flew Apollo.
• 2:03
  [Host] I can't square this. Amazon is the one raising the price. Amazon is also the one buying the memory.
• 2:10
  [Guest] Both, in the same season. Andy Jassy lifted Amazon's capital spending for this year to two hundred twenty billion dollars, partly because memory got more expensive, and told analysts the company still won't have enough capacity to meet demand.
• 2:23
  [Host] So the buildout bids the price up, and the checkout aisle settles the tab.
• 2:28
  [Guest] And it isn't a loss, it's a transfer. That money lands on Samsung and SK Hynix, both posting record profits through this shortage.
• 2:36
  [Host] Where does this stop being a gadget story?
• 2:38
  [Guest] The Atlantic reported this month that cars are next: a few percent on the average new vehicle, which on a fifty-thousand-dollar car is about two thousand dollars.
• 2:48
  [Host] So everything I hear about AI says it drives costs toward zero, and the dividend I actually collect is a more expensive router.
• 2:56
  [Guest] Both are true, just not in the same year.
• 2:59
  [Host] Patrick Deglon's book Unscarcity has a name for that fifty-year curve: the Automation Dividend, machines collapsing the cost of everything they touch. I believe the dividend. I just notice Amazon raised its data center budget and the price of a smart speaker in the same month, for the same reason.
• 3:16
  [Guest] And only one of those two bills goes to someone who can't negotiate. For more on who carries the cost of the buildout while it's still being built, head to unscarcity dot ai. The book is on Amazon, the audiobook is on Spotify. This has been Minds, Bodies, and Terawatts.