Memory Stocks Are Feeling the Pressure as a $3.7T Chip Selloff Raises Fears of a Peak

The memory chip boom has been one of the biggest winners of the AI spending race. Prices have surged as data centers absorb more supply, delivering record profits for manufacturers.

But those same prices are now hurting customers, and investors are beginning to question how much longer the rally can last. The broader chip and memory group has lost roughly $3.7T in market value since Oct. 6.

The PC business takes a hit

IntelINTC is among the first major chipmakers feeling the pressure. Higher memory prices are making computers more expensive, weakening demand for the processors that power them. The company expects PC unit sales to fall 12% in 2026, followed by another 10% decline in 2027.

That's a problem for Intel, which typically generates 50% to 60% of its revenue from PCs. Morningstar has lowered its fair value estimate for the stock to $85 from $105, while Intel expects memory shortages to persist into the first half of 2027.

Its data center business offers some relief, with revenue climbing 78% year over year. However, manufacturing constraints are limiting how much of that demand Intel can turn into sales.

Record profits meet higher expectations

Memory manufacturers have enjoyed the other side of the shortage, with customers paying considerably more for their products.

MicronMU reported fiscal fourth-quarter revenue of $54.23B, up 379% from a year earlier, alongside an adjusted gross margin of 87%. The company expects revenue to reach approximately $61.5B in the first quarter of fiscal 2027.

SanDiskSNDK delivered similarly strong results, with quarterly revenue reaching $11.03B and adjusted earnings of $49.51 per share. Its data center revenue jumped 61% sequentially to $4.8B.

The boom has also benefited storage companies. Western DigitalWDC, which separated its flash-memory operations into SanDisk, reported a non-GAAP gross margin of 58.1%. Meanwhile, SeagateSTX continues supplying high-capacity hard drives to cloud operators.

Yet record earnings haven't been enough to reassure investors. With expectations already elevated, even modest signs of slowing growth are becoming harder to overlook.

The first cracks in pricing

Japan's Kioxia offered an early warning that memory prices may not keep rising at the same pace.

The company forecast December-quarter operating profit of ¥2T, missing analyst expectations of ¥2.35T. More importantly, average NAND selling prices increased in the mid-20% range last quarter, slowing considerably from a 70% increase in the previous quarter.

Management attributed the softer outlook partly to shipment timing, with some orders arriving earlier than expected and others delayed until March. Demand from AI data centers remains strong, and Kioxia says its planned output for next year is already sold out.

That distinction matters. The shortage hasn't necessarily ended, but the pace of price increases may be approaching its peak.

Why cheap valuations can mislead

Micron trades at roughly 12 times its fiscal 2026 adjusted earnings of $75.52 per share, a seemingly attractive valuation for a company reporting extraordinary growth.

But memory chips are notoriously cyclical. When supply catches up with demand, prices can fall quickly, taking earnings with them. A low multiple based on peak profits doesn't necessarily make a stock cheap.

This cycle does have an important difference. Micron has secured 26 strategic customer agreements extending through 2030, many with price floors and ceilings. Together, they cover more than 75% of expected fiscal 2027 shipments.

SanDisk has also locked in longer-term agreements covering roughly half its fiscal 2027 bit shipments, with that share expected to reach two-thirds by fiscal 2028.

These contracts provide greater revenue visibility, although they won't completely shield either company from a slowdown.

That concentration leaves memory suppliers exposed if their largest customers begin cutting budgets.

There is some historical encouragement. Semiconductor stocks have risen in all eight midterm election cycles since 1994, measured from the final October close through June. However, the sector suffered additional declines of roughly 11% in both 2002 and 2018 before recovering.

For investors, the next test isn't whether AI demand remains strong. It's whether memory companies can sustain their earnings as pricing growth slows, and whether today's valuations already account for that risk.