Memory and storage stocks are the market’s hottest trade, but investors aren’t sweating the companies’ suddenly elevated valuations as the buildout of artificial intelligence transforms their cyclical nature.
Even though Sandisk Corp., Western Digital Corp., Micron Technology Inc. and Seagate Technology Holdings Plc have been the best performing shares in the S&P 500 Index since the end of 2024, investors continue to view them as attractive buys. And while they may look expensive based on their past stock prices, the nature of the AI trade is making those historical comparisons irrelevant.
“The playbook needs to be torn up in terms of how you think of memory cycles,” said Joe Tigay, portfolio manager at Equity Armor Investments. “This is a new world, with a much higher floor, and that suggests stock prices and valuations are going to be a lot more sustainable than past cycles. The biggest companies in the world, with deeper pockets than you can dream of, are going to be fighting each other for memory for a while.”
Sandisk shares have been on a tear since it separated from Western Digital last year, and it has soared out of the gate in 2026 with a 107% gain. Yet, the shares are trading for 23 times estimated earnings, which is below the tech-heavy Nasdaq 100 Index’s multiple of roughly 25. Seagate’s multiple is around 24, while Micron is among the 10 cheapest stocks in the Nasdaq 100, trading at less than 11 times estimated earnings, even with a gain of 36% in January.
Shares of Sandisk fell 3.2% on Thursday, while Seagate fell 2.4%, Western Digital fell 3.6%, and Micron fell 1.7%.
Those valuations would hardly be considered nosebleed levels for most companies. However, memory and storage stocks have historically received lower market valuations due to their cyclical nature.
Of course, by other measures, the stocks do look pricey. The 14-day relative strength indexes for Sandisk, Micron and Western Digital are at levels that indicate to technical traders that the shares are overbought, while Seagate is getting close.
Why It’s Different
Memory chipmaker shares have historically been tied to the industry’s boom and bust cycles. Demand for memory has depended heavily on the computer industry and more recently the mobile phone business. Short term fluctuations in those markets have made it hard for memory makers to time the introduction of new supply, leading to periodic gluts. Micron lost money as recently as 2023, as did Western Digital in 2023 and 2024.
That has traditionally kept a lid on multiples, as investors anticipated uptrends would be followed by earnings-eroding downtrends. With the emergence of AI, however, there’s been a fundamental change to the demand landscape as the biggest companies in the world invest aggressively to build out the technology’s infrastructure, of which memory chips and other storage components are a critical component.
This backdrop is expected to persist at least through 2026, contributing to accelerated growth and skyrocketing memory prices, with an index of spot prices for DRAM chips soaring in recent months.
“This time is different,” said Francisco Jeronimo, an analyst at IDC who sees the rise in memory prices as a “crisis” for hardware makers. “This isn’t a normal cycle. This is a profound, long-term change that may last for two or three years.”
While the phrase “this time is different” is often connected to market tops, Jeronimo sees memory’s role in the AI buildout potentially putting a permanently higher floor under memory prices. “Even if there’s an AI bubble that bursts and demand for AI memory slows, I don’t think prices will go back to levels they were six months ago,” he said.
He’s not the only one. BNP Paribas upgraded Seagate to outperform on Wednesday, with analyst Karl Ackerman getting “greater conviction that robust data center storage demand could drive an upcycle longer than we initially expected,” and that as a result, “a secular re-rating of Seagate (as well as Western Digital) to over 20x is justified.”
Analysts have been growing more positive on the group’s fundamentals and stock prices. The consensus view for Sandisk’s net 2026 earnings per share is up 172% in just the past three months, while revenue expectations have jumped more than 21%, according to data compiled by Bloomberg. Micron’s estimates have also been aggressively revised higher.
That said, Wall Street doesn’t seem to expect the stocks to climb much further. With the exception of Seagate, the four major players are all trading above their average analyst price targets. Sandisk is 32% above its average target, making for the weakest return potential in the S&P 500.
The scale of the recent gains is enough to give investors pause, according to Mark Bronzo, chief investment strategist at Rye Strategic Partners. He agrees that memory stocks warrant higher multiples and sees room for the group to continue working higher over time, but he also urges caution in the near term.
“It has become the consensus view that you need to own these names, and that can be dangerous,” he said. “That said, memory prices will remain strong, which will support their earnings. The fundamentals look so strong that I don’t know who the seller would be. Anytime they see weakness, I think the dip will get bought.”
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