Micron Surges Over 3% as Musk Thanks Company for Substantial Memory Chip Allocation

According to Investing.com on Thursday (23rd), Elon Musk, during Tesla's (TSLA-US) Q2 earnings call on Wednesday night, publicly thanked Micron Technology (MU-US) for providing Tesla with a 'very substantial' allocation of memory chips under 'reasonable terms' at a time when memory prices were described as 'quite crazy'.

Spurred by these remarks, Micron's stock rose 3.2% on Thursday, with investors interpreting Musk's comments as validation of a deepening strategic supply relationship.

This contrasted sharply with Tesla's own stock performance. Tesla's shares plunged 14.5% due to disappointing earnings, negative free cash flow, and weak automotive profit margins.

According to the transcript of the earnings call, Musk's exact words clearly highlighted the importance of this supply arrangement: 'In fact, I also want to thank Micron for providing us with memory allocation. They had to make some very difficult decisions on memory allocation, and we really appreciate Micron for making space for Tesla over the next few years. Given that memory prices are quite crazy right now, them actually providing us with a very substantial allocation under reasonable terms is really appreciated.'

The phrase 'over the next few years' is particularly noteworthy.

TrendForce reported on Thursday that Micron's Strategic Customer Agreements (SCA) are long-term contracts, typically locking in prices and volumes for 3 to 5 years. Currently, such agreements cover about 20% of Micron's DRAM output and approximately one-third of its NAND supply.

Tesla appears to be joining the growing list of AI-related SCA customers. According to TrendForce, this list also includes General Motors, Ford, and Anthropic.

Micron has not yet publicly confirmed the specific terms, duration, or volume of the agreement with Tesla, so it remains unclear whether this arrangement constitutes a formal multi-year SCA or merely a shorter-term supply commitment.

In a broader context, this supply collaboration holds significant strategic importance for both companies.

Tesla is currently in the midst of a new capital expenditure cycle. Musk stated that the company's investment priorities include AI computing, the Optimus humanoid robot, the Robotaxi fleet, and semiconductor manufacturing—all of which require large quantities of memory chips.

Musk also used language similar to Apple CEO Tim Cook's description of memory shortages, calling it: 'the biggest price increase I've seen of anything, ever.'

This description indicates that memory shortages are not just a temporary procurement issue but a systemic bottleneck that could constrain Tesla's expansion timeline.

Musk also directly addressed Tesla's broader spending plans: 'This year is going to be a very big year for capital expenditures, but I'm confident that everything we're investing in is going to deliver amazing returns. This might be the highest capital expenditure return we've ever had.'

In addition to Musk's endorsement of Micron, Alphabet's significant upward revision of its capital expenditure outlook has further bolstered market optimism toward the memory industry.