Elon Musk Thanked Micron Twice on Tesla's Earnings Call -- Here's Why That's Great News

On pretty much every Tesla (NASDAQ: TSLA) earnings call, CEO Elon Musk thanks Tesla employees for their hard work. He often expresses gratitude to Tesla's customers for their support as well. What he doesn't usually do is thank other companies.

But on Tesla's Q2 earnings call last week, Musk went out of his way to thank Micron Technology (NASDAQ: MU) not once but twice!

Here's why Musk is expressing gratitude to the memory chipmaker and why it's great news both for Tesla and Micron shareholders.

Image source: The White House.

Doubly expensive, or more

We're in the middle of a global memory chip shortage.

Random-access memory (RAM) is necessary to keep data actively available to a processor for computation. In most computers, this is handled by a type of memory chip called dynamic random access memory (DRAM). DRAM is cheap to produce and can hold a lot of data.

But artificial intelligence (AI) compute is so complex that it requires more than a single DRAM wafer. Luckily, high-bandwidth memory (HBM), which consists of several DRAM chips stacked on top of each other, delivers incredible similar data retrieval speed and a much higher capacity. Micron Technology is one of only three major global providers of DRAM and HBM. The other two are South Korean: tech giant Samsung and SK Hynix (NASDAQ: SKHY), which recently debuted on the Nasdaq.

These companies have devoted almost all of their memory chip fabrication capacity to churning out DRAM and HBM for AI operations, and demand is still outstripping supply, so they've raised their prices across the board. According to Counterpoint Research, memory and storage prices have quadrupled over the past nine months. That's caused prices to go up for anything that uses memory chips, including smartphones, laptops, and cars.

Doubly thankful

Musk went out of his way to sing Micron's praises in response to a question about supply chains for the company's Optimus humanoid robots. Andrew Percoco of Morgan Stanley asked Musk about "some of the dialogue you've had with potentially some external suppliers."

In response, Musk name-checked Samsung, Taiwan Semiconductor Manufacturing, and Panasonic for increasing production of semiconductors and battery cells, but after Tesla's VP of Supply Chain Karn Budhiraj talked about Samsung's commitment to future projects, Musk jumped back in with his first note of thanks to Micron:

I'd actually also like to thank Micron for giving us memory allocation. They've got to make some very tough decisions on memory allocation. We really appreciate Micron making room for Tesla in the years to come and giving us actually a very significant allocation on reasonable terms given the pretty insane pricing of memory these days.

Over 20 minutes later, near the end of the call, William Stein of Truist Securities asked Musk about hardware upgrades. In response, Musk talked about the AI chip upgrade cycle, finishing with:

I think things are going really well on the chip front. Yeah. Again, I'd like to thank TSMC and Samsung, and Micron for their support.

Image source: Micron Technology.

Doubly surprising

What's doubly surprising about Musk's double thanks is that a lot of people have been blasting Micron instead of thanking them. Notably, Apple CEO Tim Cook blamed "the memory guys ... passing along huge price increases" for a sweeping 20% price increase on Apple's products.

Micron Chief Business Officer Sumit Sadana has defended his company's pricing. When memory prices collapsed in 2023, he noted in a recent interview, big customers showed no mercy, negotiating ultra-low prices that pushed Micron's gross margin into negative territory. This prevented memory suppliers from investing in capacity increases that would have come online by now. Current investments in memory fabrication facilities aren't expected to come online for at least another year.

However, the fact that Micron has been collaboratively working with Tesla on pricing, to the point that Elon Musk is going out of his way to thank the memory supplier twice in one earnings call for its "reasonable terms," suggests that Micron is prioritizing long-term business stability over short-term windfall profits.

In any high-tech industry, product reliability and quality are just as important as price. By building relationships with Musk and others now, instead of just squeezing them dry, Micron improves its odds of avoiding a catastrophe down the line when memory capacity inevitably increases and prices fall. That's great news for Tesla and Micron investors everywhere.

John Bromels has positions in Apple, Micron Technology, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has positions in and recommends Apple, Micron Technology, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.