Elon Musk Wants to Bring on 20 Gigawatts of Compute Capacity. Here's What That Could ...

Key Points Elon Musk's AI capacity plans could create a sustained bottleneck in memory chips. Micron's financial performance has been phenomenal in recent quarters. This may continue for quarters to come, but it is unclear how sustainable Micron's profits are. 10 stocks we like better than Micron Technology › The artificial intelligence ( AI ) world revolves around bottleknecks. Racing ahead are the world's largest companies getting infrastructure up and running, with the goal of staying ahead in the latest AI technologies. This will require hundreds of billions in capital expenditures . Elon Musk and Space Exploration Technologies (NASDAQ: SPCX) are going all in AI, with plans to get 15 to 20 gigawatts of capacity up and running for its data centers by the end of next year. However, according to Musk on the SpaceX conference call , there is one bottleneck above all others preventing this growth: memory computer chips. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Here's what Musk said about memory chips and what it could mean for the sector as it looks to capitalize on the AI spending boom. Image source: Getty Images. Massive compute investments When making investments in AI data centers, allocators such as Musk prefer to describe capacity in gigawatts. A gigawatt is a unit of electric power, which translates to 1,000 megawatts or 1 billion watts. For reference, New York City will consume 10.4 gigawatts of power at peak energy demand during a summer heat wave. Data centers rely on electricity to keep their compute infrastructure running, so securing these power sources is important to project success. Musk wants to build more than the maximum demand of all of New York City for SpaceX's AI data centers in less than two years. It's an ambitious goal that could put the competition for computing power into overdrive. This will translate into massive amounts of demand for computer chips like Nvidia 's, but also for memory chips. Memory chip demand With the rise in demand for AI from consumers and enterprises, cloud computing services like the ones being built at SpaceX are racing to secure advanced memory chips. Why? These chips store all the data used by these AI models, as well as consumer data. In the last SpaceX conference call, Musk said that unit volume for memory chips is growing only 20% year-over-year, compared to 200% growth in customer demand. In other words, the demand he is projecting for SpaceX and other AI cloud players still greatly outpaces the growth in memory chip output from the large manufacturers. This will keep the memory chip supply a bottleneck for the industry, allowing companies to keep raising prices. At the same time, it gives them the runway to keep expanding production volumes. This dynamic can be seen in Micron Technology 's (NASDAQ: MU) financials. Micron is one of the few providers of memory chips globally and saw its revenue grow to $41 billion last quarter, up from $9.3 billion in the same quarter a year prior. It is currently producing an operating margin of 80%, meaning $8 of every $10 in revenue is falling to the bottom line as profit. Simultaneously, Micron's capital expenditures have grown to $25 billion in the trailing 12 months and are likely to continue to grow in the years ahead to meet demand from companies like SpaceX. MU Capital Expenditures (TTM) data by YCharts Should you buy memory chip stocks? Right now, Micron's business is firing on all cylinders. If it maintains this 80% operating margin , revenue can keep growing at this insatiable clip; it could see total revenue grow to $200 billion in a single 12-month period, with more than $150 billion in operating income. This is the future Musk is painting for Micron in the ensuing quarters. That looks cheap compared to Micron's current market cap of $1.06 trillion. The question is whether this memory-demand boom is sustainable in the years ahead or headed for an eventual bust. Memory chip demand has fallen off a cliff many times in the past few decades, sending the profits (and share prices) of stocks like Micron down with it. If you believe AI demand has changed the memory chip market from a cyclical industry to secular growth, Micron stock may be a buy right now. Otherwise, it is best to avoid this stock for the time being. Should you buy stock in Micron Technology right now? Before you buy stock in Micron Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Micron Technology wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $432,189 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,330,956 !* Now, it’s worth noting Stock Advisor’s total average return is 967 % — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 22, 2026. Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy .