The Memory Trade: A Cautionary Note

by

The current enthusiasm for artificial intelligence has, predictably, spread to the manufacturers of the components that make it possible. A new focus has settled upon memory and storage, and with it, a renewed appetite for speculation. It is worth pausing to examine the situation with a degree of circumspection.

Two names are currently prominent: Micron Technology, a producer of dynamic random access memory and NAND solutions, and Sandisk, specializing in NAND flash storage. Both have experienced a surge in share price, fueled by the belief that they will benefit from the expansion of AI infrastructure. The question is not whether these companies will profit – they almost certainly will – but whether the current valuations are justified, and whether investors are once again being led into a bubble.

The Illusion of Scarcity

In the early stages of the AI buildout, much of the capital flowed to Nvidia, the maker of the processors that drive these systems. This was logical, as processing power is fundamental. However, it is now being asserted that memory and storage are becoming the limiting factor. This claim, while not entirely without merit, is presented with a convenient disregard for the cyclical nature of the semiconductor industry. Supply and demand imbalances are commonplace, and historically, they have been resolved by increased production, not perpetual price escalation.

The narrative of a “memory supercycle” is being used to justify optimistic projections. Capital expenditure budgets are indeed rising, and prices for DRAM and NAND chips are increasing. But these are not necessarily indicators of long-term scarcity, but rather of temporary market conditions. The assumption that demand will continue to outstrip supply indefinitely is, at best, a gamble.

Sandisk: A Specialized Position

Sandisk, following its separation from Western Digital, has positioned itself as a leader in NAND flash storage, particularly in enterprise solid state drives. This specialization is often presented as a strength, and it is true that the company has a foothold in a growing market. However, it also carries a risk. A narrow focus can leave a company vulnerable to disruption or shifts in technology. The assertion that Sandisk’s high bandwidth flash (HBF) offers a significant advantage in energy efficiency is noteworthy, given the growing concern over the power consumption of data centers. But it is also a claim that requires independent verification.

Loading widget...

A Question of Risk and Reward

The choice between Micron and Sandisk, or indeed either of them and other semiconductor manufacturers, ultimately comes down to an assessment of risk. Micron, with its broader product portfolio, may appear to be the more stable option. Sandisk, as a more focused player, offers the potential for higher growth, but also carries greater risk. Both companies trade at valuations that, while not exorbitant, are certainly not conservative. The current price-to-earnings multiples suggest that a significant degree of future growth is already factored in.

It is tempting to believe that memory and storage will remain bottlenecks in the AI infrastructure buildout for the foreseeable future. However, history teaches us that technological progress is rarely linear. New materials, new architectures, and new manufacturing processes are constantly emerging, and they often render existing technologies obsolete. To assume that the current leaders will maintain their dominance indefinitely is a dangerous presumption.

Therefore, while both Micron and Sandisk may offer some potential for profit, it would be prudent to approach them with caution. A diversified portfolio, and a healthy dose of skepticism, are always the best defenses against the inevitable fluctuations of the market. The pursuit of profit should not blind us to the fundamental principles of sound investment.

Read More

2026-02-27 21:22