This AI Memory ETF Raised $1 Billion in One Day. Here Are 3 Stocks in Its Holdings You Should Consider Buying

Investors looking for an easy way to tap into artificial intelligence stocks have a new option: the Roundhill Memory ETF (NYSEMKT: DRAM). The fund is less than two months old, and in its first month, about $5 billion was invested in it -- with one day burning through $1 billion alone.

The fund is a collection of some of 13 AI companies -- spread across memory, data storage, and other companies -- including three popular stocks: Micron Technology (NASDAQ: MU), Sandisk (NASDAQ: SNDK), and Western Digital (NASDAQ: WDC).

Here's why putting a little money toward these companies could be a smart move right now.

Image source: Getty Images.

Western Digital is the storage company of AI

Western Digital has surged as technology companies are investing hundreds of billions of dollars to build data centers for AI processing.

AI computing has led to a massive uptick in Western Digital's disk storage sales, with revenue rising 45% to $3.3 billion and diluted non-GAAP earnings jumping 97% to $2.72 in the third quarter.

And Western Digital's management sounds optimistic that current growth is more than a blip. "We are truly seeing that the AI-driven data economy is creating an unprecedented demand for high-capacity, reliable, high-performance storage on HDDs [hard disk drive]."

The high demand for storage -- paired with limited supply -- has helped boost Western Digital's gross margin, which just crossed over 50% -- up from less than 40% in the year-ago quarter.

Investors have taken notice of all this demand and have pushed Western Digital's share price up 1,000% over the past 12 months, as of this writing. But even with that surge, Western Digital's shares have a trailing price-to-earnings ratio of less than 29, below the tech sector average P/E ratio of 36.

Sandisk's memory momentum is surging

Sandisk sells memory products that include everything from portable drives to PC and smartphone storage to data center memory. And it's this last category where Sandisk is experiencing the most growth and has the biggest potential.

The company's data center memory sales accounted for 25% of SanDisk's sales in the third quarter and are the main reason its revenue has surged 251% over the past year to nearly $6 billion. Sandisk CEO, David Goeckeler, summed up the data center opportunity on the third-quarter earnings call, saying, "Data center has become our fastest-growing market, and the workloads driving that demand -- including inference, reasoning, and agentic systems -- represent a structural and durable shift in how the world's most consequential technology is built and deployed."

With staggering 4,000% returns over the past year, it's probably no surprise that Sandisk's shares aren't a bargain right now. The stock has a trailing P/E ratio of about 53. That doesn't mean Sandisk isn't worth owning, but if you're buying shares now, you need to know you're paying a premium for what you're getting.

Micron Technology sees more memory demand ahead

The current AI supercycle is causing a surge in demand for Micron Technology's memory that's nothing short of amazing. Revenue spiked 196% in the third quarter to $23.9 billion, and non-GAAP earnings soared 682% to $12.20 per share.

Memory customers often have short contracts due to the cyclical nature of memory demand, which is why it's notable that Micron secured its first-ever five-year contract in the most recent quarter.

Micron's management said that AI has "fundamentally recast memory as a defining strategic asset in the AI era," and the company believes it could see further demand in the coming decades from humanoid robotics, which it sees as "one of the largest product categories in the technology world."

Even with Micron's stock rising 820% over the past year, its shares are still relatively well-priced, with a trailing P/E ratio of 35.

One thing you should know about AI infrastructure stocks

Even with memory and storage demand surging higher and artificial intelligence still in its early innings, there's no telling how long the current boom will last. Many hardware stocks have risen dramatically in the past as product demand rose, only to come back down.

I don't think that means investors should avoid buying these stocks right now, but it's important to understand the risks. Owning shares of these companies, or even the Roundhill Memory ETF, could be a good investment if AI data center expansion remains robust over the coming years.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Western Digital. The Motley Fool has a disclosure policy.