Memory has emerged as one of the most critical components in the artificial intelligence (AI) chip stack. While accelerator chips such as central processing units (CPUs), application-specific integrated circuits (ASICs), and graphics cards continue to do the heavy lifting in AI data centers for training and inference, memory chips enable those accelerators to perform optimally.
Memory chips don't undertake computing tasks. Instead, they store massive amounts of data needed for AI model training and inference -- NAND flash -- and transport huge data volumes to AI accelerators quickly -- dynamic random-access memory (DRAM).
As a result, the demand for both DRAM and NAND flash has taken off, fueling tremendous growth at Micron Technology (MU 1.23%) and Sandisk (SNDK 4.12%). Let's take a closer look at the prospects of the memory market and check why these two semiconductor stocks can sustain their red-hot stock market rally.
Image source: Micron Technology.
The memory industry's revenue is poised for a significant lift-off
AI data centers have been lapping up the available NAND flash supply to store massive data volumes, while AI chip designers have been designing accelerators with bigger DRAM, known as high-bandwidth memory (HBM), to unlock the full computing power of their chips. It is estimated that AI data centers will consume 70% of the memory chip supply this year.
NASDAQ: SNDK
Key Data Points
The AI-driven memory demand is so strong that industry watchers believe that the ongoing shortage could last until 2030. The resulting increase in memory prices and robust demand from data centers is pushing the memory industry's revenue up at an incredible pace. Market research firm TrendForce anticipates a 134% increase in memory revenue to $552 billion in 2026. The growth is poised to continue in 2027, with an estimated 53% increase to $843 billion.
This is great news for Sandisk and Micron Technology, two companies that have witnessed phenomenal growth in their revenue and earnings and have seen a significant spike in their share prices.
Micron and Sandisk investors can expect more upside
Micron Technology reported an increase of almost 3x in its revenue in the second quarter of fiscal 2026 (which ended on Feb. 26). The favorable memory pricing led to an increase of almost 8x in its adjusted earnings per share to $12.20.
Sandisk, a pure-play NAND flash storage supplier, reported a 251% year-over-year increase in revenue in the previous quarter to $5.95 billion. Its gross margin shot up by 55.7 percentage points year over year, driven by a sharp spike in NAND flash prices. As a result, Sandisk's adjusted earnings per share landed at $23.41 last quarter, a significant improvement over the loss of $0.30 per share in the same period last year.
We have already seen that the memory market's revenue will grow at a solid pace going forward, suggesting that Micron and Sandisk will be able to sustain their phenomenal growth. Specifically, analysts are expecting Sandisk's earnings to increase by 21x in the current fiscal year, followed by a 168% jump in the next fiscal year.
Micron's earnings, meanwhile, are expected to jump by 7x this year and 76% in the next fiscal year. Buying these AI stocks is a no-brainer given their phenomenal potential and cheap valuations.
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So, investors looking to add a couple of hot growth stocks to their portfolios would do well to buy Sandisk and Micron Technology, as their sizzling stock market rally is here to stay.
