Micron, SanDisk Stocks Surge as AI Spending Confidence Rises

Optimism surrounding artificial intelligence (AI) spending and supportive U.S. policies for the memory chip sector have fueled a significant rally in shares of leading chip manufacturers like Micron Technology (MU) and SanDisk (SNDK). Investors are increasingly confident in the sector, driven by strong financial performance reports from AI companies and efforts by U.S. officials to support domestic producers against Chinese rivals.

This surge is a direct consequence of the explosive demand for High Bandwidth Memory (HBM) and Dynamic Random-Access Memory (DRAM), which are crucial for AI applications. Micron reported robust results for the third quarter of fiscal year 2026, with revenue soaring by 345.8% year-over-year to $41.46 billion and a gross margin of 84.9%, surpassing analyst expectations. SanDisk (the memory business spun off from Western Digital) also contributed to market optimism with its investor day presentation, outlining long-term financial targets that exceeded expectations, including an adjusted gross margin nearing 80% and an adjusted free cash flow margin around 50%.

Supply constraints and strong demand have led to a noticeable increase in memory chip prices. HBM production, in particular, is more complex and requires significantly more wafer capacity than standard DRAM, leading to persistent bottlenecks. Extended lead times for equipment and the reallocation of capacity towards HBM production mean that DRAM supply is struggling to keep pace with demand, granting manufacturers significant pricing power. This situation has also resulted in higher component costs for other sectors, such as personal computers and smartphones.

In a broader economic and political context, the U.S. government's stance against Chinese memory chip manufacturers is playing a pivotal role. U.S. Commerce Secretary Howard Lutnick explicitly stated that the U.S. government does not want companies like Apple to procure memory chips from China. This policy aims to make it more challenging for Chinese firms such as ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corporation (YMTC) to access global supply chains, thereby providing a competitive advantage to U.S.-based and allied memory chip producers like Micron and SanDisk.

Analysts and market expectations suggest that the AI-driven memory chip boom could extend beyond historical cycles. Bank of America Global Research projects that Micron's earnings per share (EPS) could reach $236 by fiscal year 2030, representing a compound annual growth rate of 34%. However, concerns about the industry's cyclical nature and the potential for overinvestment to lead to future oversupply are also being voiced. Specifically, while NAND flash memory supply might ease in the second half of 2027, DRAM capacity is expected to remain tight throughout 2027.