Why Big Tech Now Runs an AI Factory

Podcast/Substack · ~23 min · Article · YouTube

• AI is no longer a software business — it is an industrial supply operation constrained by physical manufacturing capacity (HBM chips, packaging lines), not code.
• Microsoft plans to spend ~$190B in 2026 on AI infrastructure and still expects capacity shortfalls. Vendor agreements written as pure software contracts do not account for physical supply risk.
• Key framework: shift from seat-based budgeting to token forecasting; treat AI capacity like a commodity with supply risk, not a SaaS subscription.
• HBM bottlenecks and chip packaging complexity are the near-term constraints affecting availability SLAs — enterprise contracts with no supply assurance clauses are exposed.
• Practical takeaway: renegotiate AI vendor contracts to include supply assurance clauses, utilisation discipline, and capacity reservation. Standard SaaS terms leave organisations exposed in a crunch.