One factor the pandemic chip scarcity made clear is how a lot the auto trade depends on microchips. We (largely) narrowly averted one other one final yr, however now an 800-pound gorilla is threatening the worldwide provide of reminiscence chips: AI knowledge facilities. Just like the Borg Collective, AI knowledge heart demand for reminiscence is assimilating the trade, and resistance is futile.
Western Digital and Seagate, two of the main arduous drive producers, have already offered out most of their 2026 stock, in keeping with Heise On-line. Counterpoint Analysis reviews that the price of reminiscence chips has skyrocketed 90 % between the fourth quarter of 2025 and the primary quarter of 2026. Because of this, Dell has elevated its pc costs by 15 to twenty %, and Lenovo is anticipated to boost costs as nicely, in keeping with TrendForce Information.
Micron introduced in a press launch that it’s shutting down its shopper enterprise on the finish of February “as a way to enhance provide and assist for our bigger, strategic prospects in faster-growing segments,” mentioned Sumit Sadana, EVP and Chief Enterprise Officer at Micron Expertise. Simply over two years in the past, Micron posted a weblog all about how essential reminiscence chips are to trendy vehicles.
AI ruins every part
The auto trade has realized from expertise, and realizes that the availability of reminiscence chips drying up is dangerous information. From Bloomberg:
“DRAM shortages are set to persist throughout the electronics, telecom, and automotive industries all year long,” Counterpoint analyst MS Hwang mentioned. “We’re already seeing indicators of panic shopping for inside the auto sector, whereas smartphone producers are pivoting towards cheaper chip options to mitigate the impression.”
Eventually week’s Wolfe Analysis summit, Ford CFO Sherry Home mentioned “that is one thing that we have been actively managing. We do consider at this time limit that we now have entry to ample provide, however we’re seeing stress on pricing, and that has gone into our ahead plan.” Elon Musk might not be our favourite particular person, however he, of all folks, is uniquely positioned with the more and more intermingled nature of Tesla and xAI, to not point out SpaceX to launch knowledge facilities into house. He is even speaking about making chips himself to maintain up together with his personal demand, in keeping with Bloomberg:
“With the intention to take away the possible constraint in three or 4 years, we’re going to must construct a Tesla TeraFab,” Musk mentioned Wednesday on the carmaker’s earnings name. “A really huge fab that features logic, reminiscence and packaging, domestically.”
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“We will hit a chip wall if we do not do the fab,” Musk mentioned, referring to the trade time period for a chip manufacturing facility, in a current podcast with Peter Diamandis, founding father of the X Prize Basis. “We have got two decisions: hit the chip wall or make a fab.”
In November, Musk equally instructed Tesla shareholders the corporate could have to construct a “TeraFab,” saying “I am unable to see some other technique to get to the quantity of chips that, that we’re on the lookout for.”
As if polluting the air we breathe, utilizing up the water we drink, and stealing the roles we work is not sufficient, AI now appears to be like poised to gobble up all of the reminiscence chips the best way Cookie Monster eats cookies. Meaning we might anticipate shortages on vehicles, computer systems, smartphones, and anything that makes use of chips, in addition to sky-high costs for what few can be found. The state of affairs might get even worse if/when the AI bubble bursts. I might higher get that Xbox reminiscence improve earlier than it is too late.
