The Memory Shortage Powering Micron's $1 Trillion Run Is Lifting These Stocks, Too

Memory chipmaker Micron Technology's market capitalization surprisingly crossed $1 trillion on Tuesday. Showing how extraordinary this achievement is, just one year ago, Micron's market value was close to $100 billion.

The reason for the stock's astronomical gains is straightforward: artificial intelligence (AI) has drained the market for the memory chips data centers can't run without -- especially the high-bandwidth memory that sits next to AI processors -- and Micron is one of only a handful of companies that make them at scale.

But Micron isn't the only name riding a market where demand keeps outrunning supply. The same shortage is rippling through the businesses that store all the data AI generates. And two of the biggest beneficiaries -- Sandisk (NASDAQ: SNDK) and Western Digital (NASDAQ: WDC) -- were a single company until just last year. Both rallied alongside Micron on Tuesday.

Here's a closer look at these two stocks.

Image source: Getty Images.

The flash side of the squeeze

When Western Digital spun off its flash-memory operations in February 2025, Sandisk inherited the part of the business that makes NAND flash -- the chips inside the solid-state drives that data centers rely on for fast storage. That looked like the less glamorous half of the split. Not anymore.

In late April, Sandisk reported fiscal third-quarter results (the period ended April 3) that showed how fast the picture has changed. Revenue more than tripled from a year earlier, to nearly $6 billion. And the swing in profitability was even more dramatic. The company's non-GAAP (adjusted) gross margin climbed from 22.7% a year ago to 51.1% in the prior quarter to 78.4% in the latest period. Further, adjusted earnings flipped from a loss of $0.30 per share a year ago to a profit of $23.41 per share.

What may matter more for the years ahead is how Sandisk is trying to tame the cyclical history of its industry. The company has begun signing multi-year supply deals that include volume commitments and fixed and variable pricing terms, with more than a third of its expected fiscal 2027 bit supply already committed.

"These partnerships support durable, structurally higher earnings and a significantly more predictable and less cyclical business for Sandisk," CEO David Goeckeler said on the company's fiscal third-quarter earnings call.

Sandisk expects the momentum to build, guiding for fiscal fourth-quarter revenue of $7.75 billion to $8.25 billion.

Still, NAND pricing has whipsawed investors before, and a sudden cooling in AI spending could pull it down sharply.

The hard drive half

Western Digital kept the other side of the old business: hard disk drives -- the cheaper, high-capacity drives that hold the bulk of the world's cloud data.

This has worked out well, too.

The hard-drive maker's fiscal third quarter, also reported in late April, showed revenue up about 45% from a year earlier, to roughly $3.3 billion, with its cloud segment -- now nearly 90% of sales -- growing even faster.

Adjusted earnings of $2.72 per share came close to doubling.

Also worth noting: Western Digital raised its quarterly dividend by 20% to $0.15 per share after cutting debt to a net cash position.

Looking ahead, the company's 2026 production of high-capacity drives is already sold out, and its customer agreements now stretch into 2028 and 2029.

"[W]e expect agentic AI to drive a step-function increase in capacity-oriented storage demand, particularly in cloud," CEO Irving Tan said on Western Digital's fiscal third-quarter earnings call.

But the AI boom is having a lopsided impact on these businesses. Western Digital's price per terabyte rose about 9% over the past year -- healthy, but modest next to NAND pricing that surged over a single quarter.

So where does that leave investors looking at three stocks that have already soared?

The shortage has certainly enhanced the bull case for all three stocks, with long-term contracts now spreading across the group, giving these companies more visibility than past cycles offered. But memory and storage have always been cyclical, and the recent gains have stretched these stocks' valuations. Demand also still leans heavily on a small group of cloud spenders, creating concentration risk.

Ultimately, these stocks' runs could have further to go if the AI build-out is truly just in the early innings. For now, though, these look like stocks with great potential that carry every bit as much risk as they do potential reward.

Daniel Sparks and his clients have 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.