One thing the pandemic chip shortage made clear is how much the auto industry relies on microchips. We (mostly) narrowly avoided another one last year, but now an 800-pound gorilla is threatening the global supply of memory chips: AI data centers. Like the Borg Collective, AI data center demand for memory is assimilating the industry, and resistance is futile.
Western Digital and Seagate, two of the leading hard drive manufacturers, have already sold out most of their 2026 inventory, according to Heise Online. Counterpoint Research reports that the cost of memory chips has skyrocketed 90 percent between the fourth quarter of 2025 and the first quarter of 2026. As a result, Dell has increased its computer prices by 15 to 20 percent, and Lenovo is expected to raise prices as well, according to TrendForce News.
Micron announced in a press release that it is shutting down its consumer business at the end of February “in order to improve supply and support for our larger, strategic customers in faster-growing segments,” said Sumit Sadana, EVP and Chief Business Officer at Micron Technology. Just over two years ago, Micron posted a blog all about how crucial memory chips are to modern cars.
AI ruins everything
The auto industry has learned from experience, and realizes that the supply of memory chips drying up is bad news. From Bloomberg:
“DRAM shortages are set to persist across the electronics, telecom, and automotive industries throughout the year,” Counterpoint analyst MS Hwang said. “We are already seeing signs of panic buying within the auto sector, while smartphone manufacturers are pivoting toward more cost-effective chip alternatives to mitigate the impact.”
At last week’s Wolfe Research summit, Ford CFO Sherry House said “this is something that we’ve been actively managing. We do believe at this point in time that we have access to sufficient supply, but we are seeing pressure on pricing, and that has gone into our forward plan.” Elon Musk may not be our favorite person, but he, of all people, is uniquely positioned with the increasingly intermingled nature of Tesla and xAI, not to mention SpaceX to launch data centers into space. He’s even talking about making chips himself to keep up with his own demand, according to Bloomberg:
“In order to remove the probable constraint in three or four years, we are going to have to build a Tesla TeraFab,” Musk said Wednesday on the carmaker’s earnings call. “A very big fab that includes logic, memory and packaging, domestically.”
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“We’re going to hit a chip wall if we don’t do the fab,” Musk said, referring to the industry term for a chip factory, in a recent podcast with Peter Diamandis, founder of the X Prize Foundation. “We’ve got two choices: hit the chip wall or make a fab.”
In November, Musk similarly told Tesla shareholders the company may need to build a “TeraFab,” saying “I can’t see any other way to get to the volume of chips that, that we’re looking for.”
As if polluting the air we breathe, using up the water we drink, and stealing the jobs we work isn’t enough, AI now looks poised to gobble up all the memory chips the way Cookie Monster eats cookies. That means we could expect shortages on cars, computers, smartphones, and anything else that uses chips, as well as sky-high prices for what few are available. The situation could get even worse if/when the AI bubble bursts. I’d better get that Xbox memory upgrade before it’s too late.
