Moore's Law is the observation that computer processing power tends to double every two years. This has seemed to hold true for the last 40 years or so, but I think that in the next couple of years, at least as far as home computers are concerned, Moore's Law will not hold true.
Here are 3 reasons why I think Moore's law will not hold up for Home Computers.
1) Home computers are becoming less and less the platform of choice for gaming. Consoles are now more popular then ever, and the PC gaming industry is feeling the punch. Does this mean PC games will go away? No, but it does mean that the bigger game developers will focus more and more on console game development, and PC gaming will become more of a niche thing (MMORPG, Indie developers). So, the need for PC's to have ever increasing processor and graphics power will not end, but it will slow.
2) Most home computer users use their computers to web surf, pirate music and movies, check email, instant message, and write a document every once in a while. We have approached a point now where operating systems and computer horsepower are more then enough to handle these tasks. Do consumers really need to update their computers every two or three years when their five year old machine is more then enough to handle these tasks? Probably not.
3) There are more and more internet enabled appliances that will compete with PC's for use for interent surfing, emailing, and instant messaging. These appliances are generally smaller and more connected through cellular networks then say a laptop, so these appliances are becoming more and more the communications medium of choice for younger people as opposed to PC's.
So these three factors, the slow down of the PC gaming industry, current PC's reaching the point where they can perform common task more then adequately fore the foreseeable future, and mobile devices competing with PC's as a communication device, all will create the perfect storm to slow down the home and to a lesser degree business demand for new personal computers. Thus we should see the investments in developing new processing power for PC's also slow somewhat, possibly making Moore's law no longer a law in the PC realm.
Apparently, the market slow down is already happening in Japan, which could be an indicator of a future global trend.
Read more about the PC market slow down in Japan [HERE].
Read more about Moore's law [HERE].