The memory sector is finding it hard to recover its upward trajectory as worries mount over the AI trade, even though underlying fundamentals remain robust. Following a powerful surge in the first half of the year, stocks of Sandisk Corp., Micron Technology Inc., Western Digital Corp., and Seagate Technology Holdings Plc have retreated significantly from their peaks and seem stalled, hovering near levels last seen in May. The pullback has been sharp, erasing months of gains in a matter of weeks, yet the companies' earnings outlooks remain strong.
Firms such as Sandisk and Micron have provided optimistic long-term financial projections and boast solid growth potential and healthy balance sheets. Sandisk presented its upbeat long-term targets during its investor day last week, signaling confidence in continued demand for its products.
Last week, New Street Research raised its rating on Micron to buy, stating that the company's growth outlook and financial robustness justify a market cap of $2 trillion to $3 trillion by 2030, compared with just over $1 trillion currently. Meanwhile, key AI investors including Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc. continue to spend heavily, underscoring the sustained demand backdrop for memory products.
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"The smart money is moving on," "said Alec Young, chief investment strategist at MoneyFlows, a quant-research firm". "The fact that they have given up a lot of their recent bounce in just a couple days shows that there are a lot of weak hands."
Although Sandisk, Micron, Western Digital, and Seagate are still among the year's best S&P 500 performers, their stock prices have dropped far from their peaks. According to Young, momentum traders are now seeking opportunities elsewhere, pointing to Moderna Inc.'s remarkable 177% surge on Wednesday and the recent uptick in speculative assets such as Bitcoin, which is heading for its strongest week since November 2024. On Friday morning, Sandisk and Western Digital saw declines, while Micron and Seagate edged up, suggesting the selling pressure may be uneven across the group.
This marks a significant shift, as momentum players had long been profiting from memory and storage shares. The explosion in AI infrastructure demand drove up prices for memory chips and related components, fueling substantial revenue gains that lifted these stocks. Sandisk and Seagate each more than tripled in 2024, and Western Digital came close. Sandisk, which debuted in February 2025, closed the year with a gain exceeding 500% before jumping another 143% in January.
By mid-2026, all four stocks were up more than 200% year-to-date, with Sandisk leading the pack after an 858% climb from January through June 30. Morgan Stanley noted that Sandisk was the most "over-owned" large-cap tech stock in the S&P 500 during the second quarter, when compared with its index weight, a signal that positioning had become crowded.
However, the trend reversed this summer: Sandisk and Western Digital have fallen over 30% from their highs, while Seagate and Micron are down about 20%. The pullback highlights how quickly sentiment can shift in a market that had become heavily reliant on AI-related optimism.
"Expectations have probably peaked, excitement has probably peaked," Young said.
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