Memory chip stocks are falling again: Why Micron, Sandisk, WDC, and Seagate keep getting hammered

It has been a bruising 24 hours for investors in memory chip storage companies, including Micron Technology, Inc. (Nasdaq: MU), Sandisk Corporation (Nasdaq: SNDK), Western Digital Corporation (Nasdaq: WDC), and Seagate Technology Holdings (Nasdaq: STX).

Yesterday, all four leaders in the memory chip space ended the day significantly lower.

Here’s what’s happening—and why some are questioning whether the RAM shortage that has driven these companies’ stock prices to new heights will soon come to an end.

Memory chip stocks get pummeled—again

Just a few weeks ago, the sky seemed to be the limit for memory chip makers. After all, the world is in the middle of a full-blown RAM shortage, which means memory chips are in high demand.

This demand has caused the stock prices of four companies—Micron, Sandisk, Western Digital, and Seagate—to surge over the past six months, with performance that has been, simply put, eye-watering.

For example, the least best-performing stock of the four companies is Seagate, but even its stock price has risen 53% in the past six months.

Micron’s stock price has performed even better, rising 92%. Western Digital is up even more, rising 109% over the past six months.

As for Sandisk, its stock performance over the same period has been phenomenal, up more than 410%.

And keep in mind that those were the gains even after the memory chip makers’ stock prices began getting pummeled last week.

Yesterday, that pummeling continued, with Micron shares dropping nearly 10% during the trading session, while Western Digital lost 8.6%, Sandisk lost 7%, and Seagate dropped 4.6%.

With yesterday’s dips, all four major memory chip makers have seen massive stock price declines over the past five days, with Micron down more than 20%, Sandisk down 18.5%, Western Digital down almost 15%, and Seagate down more than 10%.

The question is, why?

What the AI boom gives, it can take away

The AI boom of the past several years has led many of the world’s largest tech giants to spend hundreds of billions building massive data centers to run their AI systems. These data centers require servers that in turn require massive amounts of RAM to run the AI.

The staggering RAM requirements for the AI boom have led to a memory chip shortage.

And while that is bad for everyday retail customers like you and me, that shortage has been very good for the memory chip makers themselves. Their once-cheaper RAM technology now sells at a premium—and they have no shortage of deep-pocketed enterprise customers snapping up all the RAM they can make.

But what the AI boom gives, it can take away.

Last week, one of the world’s AI leaders, Google, announced it had developed a new technology called TurboQuant. As Fast Company previously reported, Google says the tech is “a compression algorithm that optimally addresses the challenge of memory overhead in vector quantization.”

Without going into too much detail, the tech essentially means that AI giants like Google might soon be able to run compute-intensive AI tasks on computers that require up to six times less RAM than they do now.

While this is great news for the AI giants, it’s horrible news for memory chip makers, as demand for their chips could drop by as much as 6x.

Why did memory stocks get hit so hard yesterday?

Importantly, Google’s TurboQuant news was released last week (RAM makers also took a beating when it was first announced), so why did memory chip stocks fall again yesterday?

It’s always impossible to know the exact motivations for any large-scale selloff in the markets, but investors probably spent the weekend digesting the TurboQuant news.

And when markets opened on Monday, enough investors thought it might be a good idea to start taking some profits on the four memory chip makers, which have seen such impressive gains in recent months.

Such profit-taking can often trigger a snowball effect, resulting in significant falls in a stock in any given trading session.

The only other thing likely to have affected memory chip stocks yesterday is the same event that has affected most other stocks over the past month: lingering uncertainty around the war in Iran.

The markets have been generally down this month, with the Wall Street Journal reporting that we could be heading for our worst quarter in four years.

What investors will be watching for in particular with memory chip stocks is whether the RAM shortage may indeed be coming to an end sooner than most expected. That answer will likely have the greatest influence on memory-chip stocks in the months ahead.

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