Elon Musk Says Memory Is Now AI's Biggest Bottleneck. Here's What That Means for Micron and Sandisk.

Listening to earnings calls can be a great way for investors to pick up information about the current business landscape, and on the Space Exploration Technologies call last week, CEO Elon Musk made a statement that has huge implications for companies all across the AI innovation spectrum.

Mostly, however, his assertion pointed to bright futures for Micron (NASDAQ: MU) and Sandisk (NASDAQ: SNDK), two of the biggest memory chip makers in the world. If you haven't invested in them yet, his words may make you rethink that position. If they're already in your portfolio, what Musk said should get you excited.

SpaceX CEO Elon Musk. Image source: The White House.

Musk called memory the biggest bottleneck in AI

During SpaceX's Q2 conference call, Musk made the comment that the limiting factor in building out AI computing capacity now is the supply of memory. He also noted that memory production capacity is increasing by around 20% per year, but demand has risen by 200%. That imbalance has led to soaring prices, which have propelled shares of Micron and Sandisk higher by triple-digit percentages so far in 2026.

However, over the past month and a half, those two stocks have sold off sharply from their peaks due to rising concerns about the health of AI spending, but I think that's just short-sighted thinking. The hyperscalers have all noted that they expect to increase the pace of their AI infrastructure build-outs for the foreseeable future, which will put further pressure on the memory chip companies to produce more. While they are building new foundries to increase their output, it will be a while before they can meaningfully boost their production capacity.

In June, Micron management said it expects more production capacity to be available by mid-2027, and announced that another facility would come online by 2028. Both of those forecasts are still a ways out, which is why the company told investors to expect the tightness in the memory chip market to persist beyond 2027.

Sandisk recently reported results for its fiscal 2026 Q4 (which ended July 3), and it delivered incredible 51% quarter-over-quarter growth. Management noted that one-third of that growth came from increased output and two-thirds came from higher prices. That shows that Sandisk and its peers have been able to keep boosting prices, and with more production capacity still being a ways out, this effect could easily continue.

Despite that, Micron and Sandisk's stocks trade at pretty cheap valuations.

MU PE Ratio (Forward) data by YCharts.

While the market may be worried that eventually, this tight supply and demand balance will reverse and memory chip prices will fall, there have been no indications yet that prices are likely to fall in the near term. As a result, I think each of these stocks is worth buying, as the growth each company is delivering should eventually translate into stellar stock performances from here.

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.