Memory stocks rally 2% to 5% in pre-market as AI demand fuels sector

Memory chip stocks rebounded Monday, with Micron Technology rising 4.07%, SanDisk gaining 4.32%, and SK Hynix climbing 5.36% in pre-market trading, as investors looked past last week's selloff and refocused on structural AI-driven demand.

"The market is repricing memory names after overcorrecting on CXMT's IPO fears," Rachel Kim, semiconductor analyst at Edgen, said. "The structural shortage thesis hasn't changed — if anything, Q3 guidance from Micron and SanDisk confirmed it."

Western Digital added 2.47% and Seagate Technology rose 2.46%, rounding out a broad sector rally. The move follows Micron's June 24 earnings report showing Q3 fiscal 2026 revenue of $41.46 billion, up 345.7% year over year, with non-GAAP EPS of $25.11 and gross margin of 84.9%. The company guided for $50 billion in Q4 revenue at roughly 86% gross margins. SanDisk's Q3 fiscal 2026 results reinforced the trend, with revenue up 251% year over year and gross margin at 78.4%.

The coordinated rally suggests investors are refocusing on the structural memory shortage that CEO Sanjay Mehrotra said will persist "beyond calendar 2027," rather than near-term risks such as CXMT's $8.5 billion IPO and potential HBM export controls. Micron has already shipped more than $1 billion in HBM4 revenue and locked in 16 strategic customer agreements covering roughly $100 billion in remaining performance obligations.

Why the selloff may have been overdone

Last week's decline erased nearly 14% from Micron's market value after CXMT, a Chinese memory maker, announced plans for an $8.5 billion IPO and reports surfaced about possible HBM export restrictions. The pullback brought Micron to $853.20, 19% below its 52-week high of $1,254.81, despite a 199% year-to-date gain.

KeyBanc raised its Micron price target to $1,750 during the selloff, signaling conviction that the bull case remains intact. The bull scenario points to $1,330.10 within 12 months, a 55.9% return, assuming HBM pricing and SCA volumes track management's plan. The bear case — driven by CXMT supply risk and $27 billion in fiscal 2026 capex — targets $677.88.

What the peer data confirms

SanDisk's 251% revenue growth at 78.4% gross margins and Western Digital's 45.5% revenue increase to $3.34 billion with gross margins above 50% for the first time in years validate the industry-wide pricing surge. All three companies are riding the same AI storage tailwind, but Micron's HBM4 exposure and $100 billion SCA book give it the most structural revenue visibility.

The risk that could unravel the bull case is CXMT. If the Chinese competitor's IPO accelerates DRAM supply into 2027, the pricing discipline that has driven memory margins to record levels could break. For now, Mehrotra's warning that DRAM demand will exceed supply beyond 2027 suggests the market is betting on scarcity, not oversupply.

Micron trades at 22.13 times trailing earnings with a market cap of $1.11 trillion. The SCA floor prices lock in gross margins that management said will be "well beyond the peaks we experienced in prior cycles." If Q4 confirms the $50 billion revenue guide and HBM4 yields hold, the current pullback will look like a buying opportunity. If CXMT scales faster than expected, the multiple compression could be severe.

This article is for informational purposes only and does not constitute investment advice.