Memory Stocks Lost Their Mojo and Strong Earnings Aren’t Helping

Sandisk Corp., Micron Technology Inc., Seagate Technology Holdings Plc and Western Digital Corp. were among the stock market’s biggest winners in the first six months of the year as demand from the artificial intelligence build out seemed insatiable.

But since then momentum has turned against the shares of AI component manufacturers, like the makers of semiconductors, memory and storage, with investors questioning the durability of massive spending commitments. As a result, Sandisk, Micron, Seagate and Western Digital are in the bottom 10% of the S&P 500 Index in the second half of 2026, and even blowout earnings haven’t been enough to reverse the trend.

“The market is telling you that expectations are changing for how long the earnings boom is going to last for these companies,” said Joe Tigay, a portfolio manager at Equity Armor Investments.

This dynamic was apparent last week, when Western Digital’s results and forecast late Thursday blew past expectations and the company boosted its dividend, but the shares fell 3% on Friday because of concerns that AI spending had peaked. At the end of September, Micron beat projections for profits and revenue and gave an outlook that was far better than expected, but the stock is down 15% since then.

Seagate is the next up, with its earnings due after the close on Tuesday, and analysts expect the company’s net income to triple. Sandisk follows on Thursday, and its earnings per share are projected to soar more than 6,100%.

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“Now that the trade has gotten long in the tooth, what can turn it around?” said Andre Bakhos, president of Ingenium Analytics. “Not only will you need great earnings, but you’ll need to see follow-through next quarter and the one after that.”

This growth is being fueled by massive spending on AI, which isn’t seen slowing anytime soon. Last week, Meta Platforms Inc. boosted its capital expenditure plans for the year. Wall Street anticipates that Microsoft Corp., Amazon.com Inc. and Alphabet Inc. will affirm or raise their AI spending plans when they report earnings this week. And on Monday, Anthropic PBC filed for its long-awaited initial public offering, which is expected to demonstrate the enduring strength of the AI trade, sending memory and storage stocks higher.

The problem is investors are becoming increasingly skeptical about the payoff from all this AI spending, particularly now that so much of it is being financed by debt. For example, a gauge of Meta’s credit risk hit a fresh record after the company revealed its projected capital expenditures. Add in a challenging economic backdrop featuring high oil prices and interest rates, and it’s easy to see where the pessimism is coming from.

This helps explain why the once high-flying memory and storage stocks have had their wings clipped. Since the start of the third quarter, Sandisk and Western Digital are down more than 44%, while Seagate has lost 33% and Micron has sunk 22%. While that’s taken a chunk out of their year-to-date gains, all remain up significantly in 2026, led by Sandisk’s almost 430% surge, which is the second-best performance in the S&P 500.

“There used to be this concentrated FOMO mentality surrounding memory, but now investors are starting to weigh the risk of all that expenditure and debate whether it can keep going,” Bakhos said.

In other words, the group needs external validation from the big AI spenders to keep the rally going. If they reassure investors that their plans are leading to profits, confidence in the group should rise because capital expenditures will remain elevated.

“The fundamental story seems largely intact over the near term, but risks are obvious and the bear case remains,” Tigay said. “Should they not live up to expectations, demand could fall off a cliff.”

Seagate and Sandisk are expected to see slowing growth in the coming years, according to analysts’ estimates. Seagate’s revenue is projected to rise about 56% in its 2027 fiscal year, which ends in June, before decelerating to 37% in fiscal 2028 and 20% in fiscal 2029. Sandisk’s revenue for its 2027 fiscal year, which also ends in June, is projected to leap 140%, but the pace is expected to slow to 20% in fiscal 2028, before actually declining 7% in fiscal 2029.

One positive for the group is the shares aren’t expensive. Micron trades at five times earnings estimated over the next 12 months, making it the second-cheapest stock in the S&P 500 after Charter Communications Inc., and Sandisk is close behind at less than six times. Meanwhile Western Digital’s multiple is around 12, and Seagate’s is 15. All are trading at a discount to the broader market, with the S&P 500 valued at roughly 19 times estimated earnings and the tech-heavy Nasdaq 100 Index at 20.

While some Wall Street pros caution that the historical cyclicality of memory demand makes those low multiples contrarian warning signals, the size and scale of the AI buildout could render comparisons to previous cycles irrelevant. Analysts’ price target for Seagate indicates the shares will rise more than 70% over the next 12 months, while Sandisk is expected to climb more than 80%. Of the 74 stocks in the S&P information technology sector, Micron, Seagate, Sandisk and Western Digital are among the top seven in return potential, according to data compiled by Bloomberg.

“People rightfully get nervous when you see a selloff, because you don’t know if it’s the top or just some air coming out before another cycle higher,” Bakhos said. “Profit takers are winning the battle now, but I think the long-term holders are in a strong position.”

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