Key Points
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Investors have been booking profits in memory stocks lately, but this doesn’t seem like the right move to make right now.
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The incredible earnings growth that Micron and Sandisk are projected to deliver makes them no-brainer buys, given their valuations.
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Micron Technology (NASDAQ: MU) and Sandisk (NASDAQ: SNDK) have been among the hottest stocks on the market this year, delivering stunning returns to investors due to their phenomenal revenue and earnings growth.
Micron stock has nearly tripled in 2026 already, while Sandisk has clocked a terrific jump of 489%. However, both memory stocks have recently experienced significant pullbacks. While shares of Micron have retreated 22% after hitting a 52-week high on June 25, Sandisk is down 30% since reaching its 52-week high on June 22.
However, these pullbacks have nothing to do with the memory market’s prospects. Instead, Wall Street is worried that rising memory costs could reduce demand for products such as smartphones and consoles, thereby hurting the margins of companies selling consumer electronics. But it is a pretty well-known fact that the sales of smartphones, personal computers (PCs), and consoles have been declining due to the memory shortage, and this hasn’t done anything to dent the prospects of Micron and Sandisk.
As such, the recent pullback in these high-flying growth stocks is a buying opportunity. Let me explain why.
The memory market isn’t dictated by smartphones and PCs anymore
There was a time when poor sales of smartphones, PCs, and consoles negatively impacted memory demand, as these devices were the primary consumers of these chips. For instance, Micron’s financial performance was woeful in 2022 due to a decline in smartphone and PC sales. Market research firm IDC estimates that smartphone sales in 2026 could drop almost 14%, while PC shipments could shrink by 11.3%.
Additionally, U.S. shipments of Sony‘s PlayStation 5 console dropped 58% year over year last month, while Xbox units dropped 12%. Ideally, the steep declines in shipments of these consumer devices should have wrecked the memory market, causing oversupply and price declines. However, that hasn’t been the case due to artificial intelligence (AI).
AI data centers require faster compute and more storage to run AI workloads, such as training models and running inference applications. AI accelerator chips, such as graphics cards and custom AI processors, need to be fed large data sets quickly so they don’t sit idle and waste energy. This is where the incredibly fast high-bandwidth memory (HBM) steps in.
HBM is manufactured by packaging multiple dynamic random-access memory (DRAM) dies vertically, which explains why it offers at least 10x the bandwidth of conventional DRAM, depending on the configuration. So, HBM is ideal for handling AI data center workloads. And because HBM is made by stacking multiple DRAM chips, it uses 3x the wafer capacity of conventional DRAM.
HBM has created a structural change in the memory market. More than half of the DRAM that’s manufactured is now used in data centers, according to Counterpoint Research. Also, HBM demand isn’t going to slow down any time soon, with Bloomberg Intelligence estimating that this market could clock annual growth of 42% through 2033.
Also, as AI workloads are data-intensive, the demand for NAND flash is also rising at a phenomenal pace. According to McKinsey, shipments of NAND flash-based enterprise solid-state drives (SSDs) could increase at an annual rate of 35% through 2030 in a base-case scenario, primarily due to generative AI adoption.
As a result, it won’t be surprising to see shipments of consumer electronics devices remain under pressure going forward, as memory makers scramble to address the requirements of data centers. Moreover, memory industry participants note that the additional capacity they plan to bring online may not be enough to address the shortage.
So, the recent sell-off in Sandisk and Micron doesn’t seem justified. But the good news is that investors can now buy these AI stocks at attractive levels.
Buying Micron and Sandisk is a no-brainer right now
Sandisk’s latest fiscal 2026 has just ended, and analysts are forecasting that the company’s earnings grew by a whopping 2,120% during the year to $66.41 per share. Similarly, Micron’s earnings in the ongoing fiscal year are anticipated to jump by 785% to $73.32 per share. The solid prospects of the memory market explain why analysts have become bullish about their prospects and anticipate their terrific growth to continue.
Data by YCharts
What’s more, both stocks are trading at really attractive levels when their stunning earnings growth is considered.
Data by YCharts
The tech-laden Nasdaq Composite index, for comparison, has an average earnings multiple of 39. Given that the AI-fueled growth of the memory market is poised to continue, it won’t be surprising to see Sandisk and Micron delivering the outstanding bottom-line growth that analysts are anticipating.
That’s why savvy investors can consider capitalizing on the recent pullback in these two stocks, as it won’t be long before they regain their mojo and start soaring once again.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
