The surge in smartphone and laptop prices could have an unexpected link to the AI boom, according to Zoho founder Sridhar Vembu. In a series of posts on X, Vembu argued that massive investments in AI infrastructure are putting pressure on multiple parts of the technology supply chain, including memory, CPUs, GPUs, power systems and cooling equipment. While he remains optimistic about AI’s long-term potential, he warned that the current investment frenzy could eventually end in a crash.
“The sticker shock seen by anyone trying to upgrade their smart phone or laptop in 2026?” Vembu wrote. “That is the AI investment boom.”
According to Vembu, the current expansion of AI has been supported by a major increase in credit since the pandemic, creating distortions across technology markets. The impact is extending beyond AI chips, with demand also driving pressure on electricity generation, transformers, backup generators, cooling systems and memory.
However, Vembu distinguished between AI technology itself and the financial boom surrounding it. He believes AI can still become a widely adopted technology even if the current investment cycle eventually collapses.
To illustrate his argument, he compared the present AI boom with the telecommunications investment bubble of the late 1990s. Fibre-based high-speed connectivity ultimately became an essential part of modern life, but that did not prevent numerous telecom equipment companies from collapsing when the bubble burst in the early 2000s.
“It is important to keep in mind that the technology can be real and become ubiquitous,” he said, suggesting that the AI credit boom could follow a similar path.
Vembu's argument is therefore not that AI itself will fail. Rather, he believes the long-term potential of the technology needs to be separated from the short-term investment frenzy surrounding it.
“The AI credit boom will meet the same fate, and I actually do believe the technology will achieve its full potential,” he wrote.
MEMORY COSTS ARE BECOMING A PROBLEM
Vembu has also highlighted another immediate challenge for technology companies: rapidly increasing memory costs.
“Memory prices up 500% in 12 months and 10x the lowest level,” he said in another post.
According to Vembu, rising memory prices, combined with increasing AI token costs, are making it increasingly difficult to operate businesses. Zoho has so far avoided passing those expenses on to customers through higher prices, but he indicated that continuing to absorb the additional costs is becoming harder.
The increase in memory prices is also forcing Vembu to reconsider a long-standing assumption in software development. For decades, programming languages and software systems were designed with the expectation that memory would remain relatively inexpensive and abundant.
“That era has now ended,” Vembu said.
He argued that developers will increasingly need to focus on creating memory-efficient programming languages and smarter compilers, including for AI applications. In his view, gains in coding productivity should not come at the expense of software that consumes excessive amounts of memory.
VEMBU HAS QUESTIONED AI'S PRODUCTIVITY CLAIMS BEFORE
Vembu's latest remarks are consistent with his earlier criticism of the AI boom. In recent months, he has questioned whether companies are actually achieving the enormous productivity improvements being used to justify their massive AI investments. He has also criticised companies for attributing layoffs to AI when factors such as rising costs and wider economic pressures may be playing a significant role.
In May, Vembu argued that blaming AI for job cuts can make companies appear technologically progressive while potentially concealing underlying financial difficulties.
His comments come as some prominent technology executives have also adopted a more cautious stance towards predictions that AI will rapidly replace large numbers of workers. OpenAI CEO Sam Altman, for example, recently acknowledged that some of his earlier expectations regarding AI-related job losses had not materialised as quickly as he had anticipated.
Vembu's broader message is to remain confident in the potential of AI while avoiding excessive enthusiasm over the investment boom surrounding it.
“Staying positive on the tech while being careful to not lose one's shirt in the bubble unleashed by boosters of the same tech - that is the careful balancing act needed today,” he said.
