Elon Musk, Chip Giant?
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What are Elon Musk's plans for entering the chip industry?
Do we have a new chip company in town? Welcome to Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoem, joined today by Dan Kaplinger and Tim Byers. And guys, I think we've got to start with what I think was one of the wildest news items of the week. TSMC has been this break on this AI CapEx spending for years at this point. But now Elon Musk is saying, hey, we need more chips. We need more capacity. I am willing to put up to $119 billion into becoming now not just an EV company, not just a satellite company, not just an AI company, but also a chip company. Tim, I want to start with you. What in the world is going on here? Because it seems like chips is one of these businesses that is really hard.
I mean, Intel has not gotten this right over the past decade. And suddenly Musk comes in and do we have a new player in town in the chip game?
It's a floor wax and it's a dessert topping, you know, for those who remember their 1970s SNL references. I mean, it's it's no, I mean, look, I've got to look that one up. There is there is nothing that Elon Musk thinks he can't do. And so here we are. Now, to be fair to him, what he believes is that in order to serve all of his various businesses, he needs compute. And he needs compute at scale. He needs it for SpaceX, he needs it for Tesla, he needs it for XAI. And so, in order to solve that problem, he wants to create TeraFab. And TeraFab is this idea of just this massive scale chip manufacturing facility organization I think there are reasons to ask questions, but there is a logic to it, so let's give him credit there.
But TSMC is an incredibly efficient supplier, and they are able to manufacture chips at scale because they've been doing it for decades. And they do it at the smallest possible form factors. And if you want to do what Musk wants to do, which is manufacture AI compute, then what you end up getting is a real push to manufacture the smallest chips possible. Right now, that's at 2 nanometer. TSMC is already there. Musk is presumably going to get there. But I think there is a lot to be determined with this. The vision As with most things that Elon Musk gives us, there is a logic behind this, but the difficulty level is just extreme.
Dan, the reason that this, I think, is so important is it impacts so many companies in the entire ecosystem. You've got the chip manufacturers, TSMC, you have Intel, you have the AI chip suppliers like NVIDIA, AMD. Is this something that investors should be thinking about? that maybe there's a new supplier in town, that maybe this is going to be this vertically integrated company that's going to take on a Google. I mean, where does your head go? Because it seems wild on the surface. But like Tim said, there is some logic to it. So you got to take it seriously.
There is, but I think the thing you have to remember is when it comes to Elon Musk, Musk is going to look after Musk's own companies first. I think that the whole purpose of this, regardless of talking about overall industry capacity, regardless of saying, hey, there might be an opportunity for us to make a contribution to the industry writ large, really, I think the TerraFab vision is about helping SpaceX, helping XAI, helping Tesla to do what they need to do, to build Optimus robots, to make massive launches of goods and services into orbit to further Mars missions. Solar power capacity for space-based data centers. even the chips necessary to get all the way to full self-driving, which we're still waiting for on Tesla.
That is the first and foremost there. Because the trend was always for Musk to try to vertically integrate that, I don't think that Taiwan Semi or any of the other chip fabs really need to be terribly worried about this because from a long-term standpoint, it was going to happen anyway.
So you think that Musk building out this chip capacity just makes sense in the long-term Musk vision? And I want to put some numbers to this. SpaceX is not public yet, but it could go public later this year and definitely is a stock that a lot of people in the Motley Fool universe are probably going to at least be interested in.
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Chapters
6 chapters
1
What are Elon Musk's plans for entering the chip industry?
0:02–5:38
2
How does Musk's chip vision impact existing chip manufacturers?
5:38–10:54
3
What challenges does Musk face in building a chip manufacturing empire?
10:54–18:03
4
What are the latest trends in the SaaS stock market?
18:03–25:11
5
How is Datadog performing amidst the SaaSpocalypse narrative?
25:11–32:23
6
What technologies are expected to thrive in the next decade?
32:23–38:20