Silicon Shortage Signals New Era of Economic Volatility by AI

According to SAEDNEWS, The world is on the cusp of a "Silicon Shock," a significant economic disruption stemming from the unprecedented surge in demand for computational power driven by artificial intelligence (AI) and hampered by global supply chain constraints. This emerging crisis carries potentially far-reaching and lasting consequences for markets and daily life.

The 1970s witnessed a similar economic upheaval fueled by oil, a vital commodity that propelled the economies of Western nations and their military operations. However, the energy crisis of that era arose from Middle Eastern oil-producing nations enacting boycotts against those supporting the Israeli regime during the Yom Kippur War. This triggered a global energy market crisis.

This oil shock demonstrated that markets alone are insufficient to resolve physical supply imbalances, and that monetary or political interventions alone cannot alleviate shortages. This prompted nations to diversify energy sources, enhance efficiency, and implement strategic stockpiling.

Now, a parallel crisis is unfolding as AI companies face a shortage of specialized AI accelerators. Hong Kong-based Asia Times reports a "Silicon Shock" of immense scale, differing fundamentally from the 1970s oil shocks. Unlike those events driven by sanctions and supply limitations, this crisis originates from an explosive and uncontrollable surge in demand.

According to the report, the world has abruptly realized the need to convert "silicon" to "intelligence" at a pace exceeding physical constraints. Over the past 18 months, computational power demand has increased 40 to 100 times.

Consequently, as the world enters 2026, it faces a shortage of silicon, initially impacting data centers, then spreading to the laptop and mobile phone markets, and ultimately manifesting as price increases and higher costs for consumers.

Some observers view the "Silicon Shock" as a speculative bubble within the AI sector, or a consequence of excessive investment by hyperscalers – large technology companies and cloud infrastructure providers seeking opportunistic profits.

Furthermore, AI, rapidly becoming an essential infrastructure component, is not easily sidelined by reduced financial resources.

Asia Times continues, highlighting that software optimizations like quantization can alleviate some pressure on manufacturers but do not represent a comprehensive solution.

The report emphasizes the most perilous aspect of the Silicon Shock: as AI demand surges and price elasticity remains low, semiconductor manufacturers have rationally reconfigured their entire production lines to prioritize AI. However, recent developments indicate that this snowballing crisis, moving downwards, is accelerating at an alarming rate, diminishing any prospect of relief.

While the crisis may appear to have peaked, the situation is projected to worsen considerably for at least the next two years.

Therefore, an increasingly undeniable reality is that we are confronting a supply chain crisis dissimilar to typical technological cycles, more akin to a geopolitical resource shock with widespread economic ramifications, both macro and micro. Concerns regarding "the electricity wall" or power shortages for AI data centers have surfaced in recent months, and these can only be partially addressed through human ingenuity or regulatory interventions.

Ultimately, whether silicon will become the "new oil" or not, the Silicon Shock has the potential to become a central pillar of the global economy, policy, and markets in 2026.