After surging through the first half of 2026, memory and storage stocks are struggling to reclaim their highs as AI trade concerns overshadow otherwise strong fundamentals.
Sandisk Corp. (SNDK), Micron Technology Inc. (MU), Western Digital Corp. (WDC), and Seagate Technology Holdings Plc (STX) remain among the top performers in the S&P 500 this year, but all four are well off their peaks.
The stocks appear stuck, trading roughly where they were in May, unable to break through despite a backdrop of robust earnings growth and bullish analyst commentary.
“The smart money is moving on,” said Alec Young, chief investment strategist at MoneyFlows, a quant-research firm, pointing to signs of broad repositioning across the market.
“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,” Young added, suggesting the selling pressure reflects positioning rather than deteriorating business conditions.
Momentum investors are chasing returns elsewhere, including Moderna Inc.’s historic 177% rally and a rebound in speculative assets like Bitcoin, which is on pace for its best week since November 2024.
The memory group had been one of the most powerful momentum trades in the market, fueled by massive demand for AI infrastructure that dramatically raised prices for memory chips and related components.
Midway through 2026, every member of the group had more than tripled for the year, led by Sandisk’s 858% surge from the start of January through June 30, making it the most over-owned large-cap tech stock relative to its S&P 500 weight in the second quarter, according to Morgan Stanley.
Since then, Sandisk and Western Digital have dropped more than 30% from their peaks, while Seagate and Micron are down roughly 20%, a sharp reversal that has rattled investors who rode the earlier rally.
“Expectations have probably peaked, excitement has probably peaked,” Young said, framing the pullback as a sentiment shift rather than a fundamental breakdown.
The underlying business picture remains strong, with New Street Research upgrading Micron to buy and projecting a market capitalization of between $2 trillion and $3 trillion by the end of the decade, compared to just over $1 trillion today.
Major AI spenders including Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc. remain committed to their capital expenditure plans, lending durability to the broader AI buildout thesis that underpins demand for memory products.
“There’s no getting around the fact that the next 12 months forward growth is really big, their margins are very good, and it seems like they’re getting better,” said Brian Mulberry, chief market strategist at Zacks Investment Management, which owns many of these stocks.
Rising interest rates are complicating the picture, creating pressure on high-valuation tech stocks whose market prices are built on multi-year growth estimates sensitive to moves in Treasury yields.
“The trade is too vulnerable to potential macro issues with rates, with the war, and with oil being elevated, which increases the odds of a rate spike,” Young said, adding, “These macro overhangs are a problem they didn’t have before.”
Valuations remain relatively modest compared to the broader Nasdaq 100, with Micron trading at 6.5 times forward earnings and Sandisk at 7.3 times, placing both among the ten cheapest stocks in the index.
Bank of America named Micron one of its “select opportunities” following the AI infrastructure selloff, with analyst Vivek Arya calling the stock’s recent decline “an enhanced buying opportunity” in an Aug. 13 note.
“The sector is still trading on positioning while fundamentals keep getting stronger underneath,” said Dave Mazza, chief executive officer of Roundhill Financial, which holds stakes in all four stocks.
“When momentum stalled, the selling fed on itself through profit taking, leveraged unwinds and repositioning,” Mazza said, arguing that dynamic is “very different from the market marking down the fundamentals, which have only improved.”
