Elon Musk has form at using his clout to pressure suppliers.

In May 2023 he rolled into a scrubby field outside Robstown, Texas, riding a Cybertruck, with Greg Abbott.

They were there to break ground on Tesla’s new lithium refinery.

A year earlier, April 8, 2022, he’d posted that the “price of lithium has gone to insane levels” and that Tesla might have to mine and refine it itself.

He’d also called lithium refining a “license to print money.”

When Elon moans about the price of something he critically needs for his companies, you can rest assured he’s at the negotiating table.

This week, he’s at it again.

He’s been a busy poster this last week getting involved in the Ukraine/Russia conflict saying, “Zelensky has gone too far” with attacks on Russian oil, while Ukraine’s Starlink got throttled.

He also posted that SpaceX (Nasdaq: SPCX) “probably” tops $100 trillion inside 10 years, and all this as Tesla was gearing up for its new Roadster reveal.

By the way, more on that next week… after all we now have a legitimate flying car.

Anyway, until Elon distracted everyone’s feed with a flying Roadster, his controversial comments this week had the entire AI trade in turmoil.

Mainly the fact that it seems Elon is very fed up with the price of memory.

Earlier in the week he said China out-scales everyone once it cracks a product, and that only three years ago RAM was a “low margin commodity.”

The next day he said this about Micron (Nasdaq: MU), one of SpaceXAI’s primary suppliers:

“Micron has been reasonable regarding future memory prices, while others have been extortionate, which is something today’s customers won’t forget…”

Yesterday he replied to a X.com financial account with 61,000 followers regarding a South Korean column warning of a 2029 memory glut with one line, “China will be making a LOT of RAM in 2028.”

The South Korean index performed so badly on Thursday they had to pull the circuit breakers twice!

So, should you believe Elon? Is China about to destroy the supply shortage of RAM. Are prices going to crater, will Micron and SK Hynix and Samsung suddenly be scrambling for customers?

No.

Remember, Elon does what serves Elon best.

SpaceX spent $15.8 billion on AI gear in a single quarter, all of it hungry for memory.

On SpaceX’s August earnings call, when he wasn’t haggling, he said memory output grows about 20% a year while demand grows 200% or more.

Earlier this month Tesla halved the memory on its AI5 chip to 72GB, which Musk said was, “the only way to get enough volume for Optimus production.”

That isn’t a man staring down a glut. It’s a man who can’t get enough RAM to build his cars, his AI factories… his robots he’s been promising the market, and we’re yet to see in mass production.

Look, there’s a bit of truth that clearly China is doing everything it can to ramp up supply of all kinds of semiconductors. Memory is absolutely one of those bottlenecks that everyone is desperately trying to fix.

China’s CXMT makes about 10% of the world’s DRAM and says it’ll ship a denser design by year end. Samsung’s P5 fab is due in 2028, and its first Yongin fab in 2029.

Micron is working on new fabs… everyone is working on new fabs. But as these come online, it will ease the supply shortage, but not eliminate it. And if the projections on humanoid robots, and more AI in the world come good, this is a long-term change to the “memory cycle,” it won’t be a cycle, it will just be constant demand.

Memory historically is a boom and bust trade, and Micron’s 87% gross margins look like a top to plenty of people.

But we never had AI before. We never had autonomous systems in abundance. We never sat on the precipice of mass market humanoid robots.

That fundamentally changes the whole demand picture for all of the hardware that goes into this.

Micron is still saying supply gets tighter in 2027 and 2028. Even Musk wrote that the newest high-bandwidth memory and 3D stacking will be “harder to solve” for China.

And I’ve barely looked at TSMC’s earnings call where they said too that demand is absolutely not falling away.

Elon talks and Elon haggles. But take what he says with a pinch of salt.

Every time we get a big selloff in semiconductor stocks, and memory stocks, and AI stocks like this, treat it as a wonderful buying opportunity.

More soon,
Lewis Maguire