Elon Musk Just Explained Why Memory Could Be the Next AI Winner.

Elon Musk says that the artificial intelligence build-out has a memory problem. The CEO of Tesla and Space Exploration Technologies (NASDAQ:SPCX) said on SpaceX’s earnings call that demand for memory chips is growing much faster than the available supply.

“The limiting factor currently is memory,” he said.

Musk’s statement is notable for two reasons. First, both his companies are keenly interested in buying memory, so Musk knows the space well. Tesla and SpaceX both rely on artificial intelligence for their future goals, and both are investing billions to purchase AI chips, memory, storage, and other AI infrastructure for their data centers.

And second, prices for memory components are rising amid massive demand, which, in turn, is causing major hyperscalers to spend billions more on capital expenditures. Alphabet raised its capex budget by $15 billion to $200 billion; Amazon bumped its budget from $200 billion to $220 billion; and Meta Platforms increased the low end of its outlook from $125 billion to $130 billion. Investors have become concerned that rising prices, coupled with the memory chip shortage, could slow the AI infrastructure boom.

Now Musk is saying that won’t be the case at all.

"The memory output is increasing by around 20% per year. Now, normally, that would be fantastically fast and amazing for any large, mature industry, but ask yourself: Is the demand increasing by 20% a year?” Musk asked. “No, the demand is increasing by 200% a year, maybe higher. So, if you've got demand increasing much faster than supply, then economics 101 would suggest that the price increases. It does not decrease."

Let’s look at two companies that would be best positioned to benefit from Musk’s viewpoint: Micron Technology (NASDAQ:MU) and SK Hynix (NASDAQ:SKHY).

Tesla and SpaceX CEO Elon Musk. Source: The White House.

Memory chip stock No. 1: Micron

Micron, by any measure, is having a solid year, with its stock up more than 215% and earnings results that are more than solid. But concerns about memory chip prices and the ongoing build-out of AI have weighed on the stock, and Micron is currently sitting 25% off all-time highs set in June.

Those concerns aren’t affecting Micron’s bottom line, however. The company reported massive growth in the fiscal third quarter (ending May 28), with revenue more than quadrupling year over year to $41.46 billion. Net income of $28.24 billion was up from $1.88 billion in Q2 2025.

Operating margins also increased -- the company’s data center segment’s operating margin rose from 38% to 87%, and its cloud memory segment’s operating margin improved from 46% to 78%.

“Micron’s record fiscal Q3 financial results and even stronger outlook for Q4 reflect the strategic value of memory in the AI era,” CEO Sanjay Mehrotra said. “Micron is investing at record levels in technology, products, and supply to address our customers’ rapidly growing demand.”

Memory chip stock No. 2: SK Hynix

SK Hynix is one of the newer stocks to the U.S. market, having completed its IPO on the U.S. market in July. But it’s already a heavyweight, with a market cap of more than $800 billion, ranking it among the top 20 publicly traded companies in the world.

The company is a leading provider of high-bandwidth memory products, and holds more than 50% of the market this year. It also has a key multiyear infrastructure and memory deal with Nvidia that’s valued at more than $500 billion.

The South Korean company had an amazing second-quarter report, with revenue of $55.7 billion, up 51% from a year ago, and operating profit of $41.62 billion, with margins of 76%. But even those numbers couldn’t satisfy the markets -- analysts had been expecting even better numbers, and the stock fell 15% before rallying to close just 9% on July 28.

The company attributed its growth to increased demand and price increases for AI products. It increased its prices for both DRAM and NAND flash memory and achieved top-tier profitability by expanding sales of high-value-added products, including high-bandwidth memory, DRAM for AI servers, and enterprise SSDs.

SK Hynix’s position in high-bandwidth memory products, its partnership with Nvidia, the leading chip and AI company, and its newly won inclusion in the Nasdaq index make the company a legitimate contender in the memory chip space. If Musk is right that memory demand is increasing far faster than supply, SK Hynix appears to be positioned well.

Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, Nvidia, and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.