Elon Musk, Chip Giant?
In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium and Dan Caplinger and analyst Tim Beyers discuss: Musk’s chip dreams SaaS recovery What technologies will survive the next decade Stocks on the radar To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. This podcast was recorded on May 8, 2026. Travis Hoium: 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 Hoium, joined today by Dan Caplinger and Tim Beyers. 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 brake 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. 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? Tim Beyers: It's a floor wax, and it's a dessert topping. For those who remember their 1970s SNL references, it's, no, look. Travis Hoium: I've got to look that one up. Tim Beyers: 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 computers, and he needs and he needs computed scale. He needs it for SpaceX. He needs it for Tesla. He needs it for xAI. In order to solve that problem, he wants to create Terafab. Tarafab 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. 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 two 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 from a log as with most things that Elon Musk gives us, there is a logic behind this, but the difficulty level is just extreme. Travis Hoium: 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, 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? 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. Dan Caplinger: 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 Terafab vision is about helping SpaceX, helping xAI, helping Tesla to do what they need to do to build optimist 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 Teslas. That is the first and foremost there, and 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. Travis Hoium: 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. But Tesla is going to be at least a partial funder of this Terafab if it ends up happening. They have $44 billion worth of cash right now, but they also have almost $8 billion worth of debt, and their free cash flow, I believe, they’re going to spend $25 billion this year in capex, is likely to go negative this year. You also need a lot of money to be a car company. Dan, the thing that we have to throw into this, too, is that this vertically integrating is very risky because if you don't have the demand, then you just are stuck with a whole bunch of fixed costs and a whole bunch of capex that you've spent by the way, we found out this week that xAI which bought all these Nvidia chips, didn't have demand for their Grok AI tool, so now they're just selling that to Anthropic. That may end up working out, but if we get to a world five years from now where you're suddenly building all this capex and we do have some bubble, that seems like a really tough place to be. Dan Caplinger: It is, but I think that Tesla, in particular, and Musk more generally, has generally been pretty good about adapting to changing market conditions. The example I'd throw out is supercharger. I think at some point, Musk would have thought that the supercharger was going to need to compete against other third-party charging infrastructure, but the fact is that the third-party charging infrastructure just has never come close to matching what the supercharger network was. Given that opportunity, given excess capacity in the supercharger network, given excess capacity and demand from the rest of the EV world, Tesla saw an opportunity. Musk saw an opportunity opening up essentially the supercharger network to these third parties. I could see the same thing happening here. I think the question you raise is, Travis, is Musk going to get the timing right, or is he going to make these supply agreements too late? There's a lot in the air right now, and it's going to take three or four years even for, this project even to come close to completion, let alone getting up to capacity, so you're right. The timelines going to be important, and we just don't have a lot of our information about this is coming from a one-page property tax abatement application in some county in Texas. We don't have the details yet, but we've been around the block with Musk plenty of times. The details come when they come, and you fill in the blanks. In the meantime, there's a whole bunch of people trying to speculate about how those blanks are going to get filled. Travis Hoium: Tim, let's speculate a little bit. Do you think about the investment landscape and this announcement. The one company that came to mind for me is I mentioned early on, TSMC has been this break on the AI build-out. Like, you can't overbuild when you can't get enough chips. Tim Beyers: Right. Travis Hoium: We've now seen Intel, their stock has skyrocketed, which maybe gives them the cash and the ability to invest a little bit more. We've seen, Micron and other memory companies say that they're going to build more capacity. Now you have Musk coming in as well with $119 billion plan. That's an area that I'm curious to hear what you think about the supply demand dynamics longer term. But is there any other areas for investors for either opportunities or risks as a supplier like this potentially comes into the market? Tim Beyers: Let's talk about how this probably plays out, and then I'll give you a thought. I think the first thing is, Musk is he's done some crazy things. He's not stupid. I think he might be what my friend Bill Mann likes to sometimes call Harvard stupid, where he's so arrogant that he thinks he can't be wrong. I think that is a feature of Elon Musk. But he knows enough to know that he can take this in stages. I do think there is a stage where Tarafab can come in and solve a problem, and that's with memory. I don't know that they're going to go straight to the most advanced chipmaking, Travis. I don't think they would be smart to do so. But if you are filling part of the capacity constraints for memory, that would be super interesting. Who do you partner with to get there? I'm not entirely sure who that would be. Wouldn't surprise me if it was like a Samsung. But you mentioned, like, where do you go for investing in this type of opportunity? I'll give you two that I think are interesting. One is you've already mentioned, which is Intel, and I know the stock is up materially. But the stock is up materially on Intel foundry doing nothing. Bupkis, really hasn't done anything. Travis Hoium: They're the reported partner. Tim Beyers: They are. Travis Hoium: With this Terafab with a 14 A, which isn't actually operational yet, but that's the idea, I think. Tim Beyers: Right and so you're talking about, so 14 A, now, it's not exactly this, but that is now you're getting under that's sub two nanometer. It does make sense. Like if Musk wants to compete at the most aggressive form factors to make the most aggressive compute, and if Intel can actually pull this off and have a manufacturing process down way under two nanometer, then yeah, that is an interesting partner, and it could really scale up Intel foundry. If Intel foundry becomes meaningful billions and billions of dollars of revenue and profit, then suddenly the math on that company looks a little different. The other, I would say is SML because you cannot get away with building all of this stuff and not having the monopolist. Or the most advanced chipmaking equipment. Like, if you want to build. Travis Hoium: Isn't that a break on these plans, though? A [OVERLAPPING] sold out for the next however many years? Tim Beyers: A 100%, it is. There’s no sense that there is going to be an alternative to ASML, and I don't think Musk is going to build it. But ASML right now, is in a wonderful position for the next five, maybe even 10 years. Look, I don't think you're going to get unbelievable returns on ASML, but if you or I could get 7% over 10 years, and that was relatively guaranteed in a market as turbulent as this. Would you take it? I would. I think ASML is interesting. Travis Hoium: Well, it definitely is going to be interesting to watch because we have the SpaceX potential IPO coming in the next couple of months, still, I think in the plans for June. What happens with Tesla? Does that get rolled into SpaceX? Do they build out a new chip manufacturing business? Lots to watch, and we'll be covering it here. When we come back, we're going to talk about the death of the SaaSpocalypse. SaaStock actually went up this week. We'll tell you what's going on. You're listening to Motley Pool Hidden Gems Invest. Travis Hoium: One of the down parts of the market in 2026? There's been some hotspots in semiconductors, in energy, but software SaaSpocalypse. We've talked about the SaaSpocalypse on this show. The potential disruption, the idea of disruption, has hit a lot of those stocks. But this week, that narrative was really broken, Tim. What earnings reports stuck out to you because it seems like almost every company that reported earnings this week did not report something that filled that SaaSpocalypse narrative. Tim Beyers: Well, not all of them, but I think it was probably better than expected, and I think Datadog is the one that stands out for me so that's Ticker DDOG rallied over 30% on results for Q1 that were just outstanding, much better than forecasters expected. Revenue was up over 32% and passed $1 billion. In a quarter for the first time, it was really impressive. This is also a very efficient company. Like, for every new dollar of sales and marketing that they invest, they got back $3.74 in revenue. That's the thing that boosts margins and gets you free cash flow, and they are still producing free cash flow so I think that's good. But the real story with Datadog here, Travis, is that they have some AI-powered products. They have one that observes the behaviors of GPs. For those who don't understand Datadog, what Datadog does is it looks at the infrastructure that you have as a company. It looks at how the software's behaving, how it interacts with systems, and it looks for outliers. When it spots outliers, sometimes it takes actions, sometimes it reports on it. A lot of the output of it is like logs, like, have a log, it says, hey, all this crap happened. That is actually really useful, so useful, in fact, that they said, this is from CEO Olivier Hamel, one of the co-founders and apparently he went on CNBC and said, we got seven and eight figure deals with two of the world's largest technology companies, and it's for their AI research labs. Now, that sounds like, you are hitting all of the buzzword bingo when you say that on CNBC, so of course. Travis Hoium: That's actually valuable buzzwords. That is, trying that's not coming out of MBA school. Like, I. Tim Beyers: No, that's what people want to hear. It's a healthy business that is growing fast, has good margins, has free cash flow, and is doing deals that seem on to the point that you made about, Hey, maybe we're breaking the SaaSpocalypse thesis here, it feels like, wait a minute, this is a company that has AI tailwinds. I'm just going to maintain here, Travis, that I still think enterprise software is the single greatest distribution mechanism. For AI technology and features. I think that is true. It doesn't mean there isn't going to be disruption. There will be disruption. But if you are an enterprise software company
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