Elon Musk's SpaceX and Tesla Are Building a $16.8 Billion Chip Factory 5 Times Bigger Than Earth's Largest Building. What Does That Mean for Both Stocks?

Elon Musk, the visionary behind SpaceX, is aiming to establish an impressive AI infrastructure with a capacity of 15-20 gigawatts by year-end. However, this ambitious plan faces a significant roadblock: memory computer chips. In a recent SpaceX conference call, Musk highlighted that memory chip demand is growing at just 20% year-over-year, while customer demand is soaring at 200% - a stark contrast that threatens to keep memory chip supply as a bottleneck in the industry.

This situation could allow companies to hike prices and keep expanding production volumes, as evidenced by Micron Technology's (NASDAQ: MU) strong financials. With revenue growing to $41 billion last quarter and an impressive operating margin of 80%, Micron is well-positioned to meet the growing demand for memory chips from AI cloud players like SpaceX.

If Micron can maintain this robust operating margin, its revenue could skyrocket to $200 billion in a single year, generating more than $150 billion in operating income. However, the sustainability of this memory-demand boom remains uncertain, as memory chip demand has crashed multiple times before, impacting profits and share prices in the industry.

While the long-term growth potential of memory chips in the AI era is compelling, investors should exercise caution and weigh the risks before jumping into the market.