AI Memory Stocks Micron and Sandisk Are Up 200% in the Last 3 Months. History Says This Will Happen Next.

Memory chipmakers Micron Technology (NASDAQ: MU) and Sandisk (NASDAQ: SNDK) have been big winners from the artificial intelligence infrastructure boom. In the last three months alone, Micron shares have added 203%, and Sandisk shares have added 217%.

Today, most Wall Street analysts think Micron remains undervalued, but the consensus says Sandisk is too expensive. The target prices below come from The Wall Street Journal.

• Micron's median target price of $1,585 per share implies 46% upside from the current share price of $1,085.
• Sandisk's median target price of $1,750 per share implies 12% downside from its current share price of $1,980 per share.

Unfortunately, history offers a much less optimistic perspective. Memory chipmakers have traditionally been prone to boom-and-bust cycles. Assuming the trend is still intact, we are moving toward the next collapse, and it could drag shares of Micron and Sandisk much lower. Here are the important details.

Image source: The Motley Fool.

Memory chipmakers are benefiting from an unprecedented supply shortage driven by demand for AI

Central processing units (CPUs) and graphics processing units (GPUs) are essential parts of the artificial intelligence hardware stack. CPUs are the brains that run applications, and GPUs speed up complex tasks by offloading repetitive mathematical calculations. Both types of chips require memory.

Meera Pandit, global market strategist at JPMorgan Chase, explains:

"CPUs store information in NAND, or long-term memory, and use dynamic random access memory (DRAM), or working memory, to perform tasks. For example, HBM, or high bandwidth memory, is a special kind of DRAM used to feed GPUs data fast enough to keep them busy."

Today, memory chip manufacturers cannot keep pace with the unprecedented demand as hyperscalers rush to build AI infrastructure. The supply shortage is so severe that NAND and DRAM prices have increased 200% and 300%, respectively, in the past year. That has led to tremendous financial results for Micron and Sandisk.

• Micron is the third-largest supplier of DRAM and NAND memory. In the May quarter, sales increased 345%and non-GAAP net income increased by more than 1,200%. Guidance for the current quarter implies sales will increase 340% and adjusted net income will increase by more than 900%.
• Sandisk is the fifth-largest supplier of NAND memory. In the March quarter, sales increased 251%, and non-GAAP net income was $23.41 per diluted share, up from a loss of $0.31 per diluted share in the prior year. Guidance for the current quarter implies sales will increase 320% and adjusted net income will increase by more than 10,700%.

Those strong financial results explain why both stocks have performed so well lately. But the memory chip market has historically been defined by boom-and-bust cycles. Assuming that trend is still intact, shares of Micron and Sandisk could crash at some point in the future.

History says Micron and Sandisk will drop sharply when the current memory chip supply shortage is resolved

Many semiconductor companies exhibit some degree of cyclicality, meaning sales rise and fall as demand expands and contracts. But memory chips have historically been the most cyclical category in the broader semiconductor industry.

That's because most NAND and DRAM chips are interchangeable commodities, so suppliers compete mostly on price. Memory chips are also very expensive to produce, so suppliers modify output to match demand. Those forces create a back-and-forth where periods of limited supply (and price hikes) are followed by periods of excess supply (and price cuts).

The last boom-and-bust cycle played out during the COVID-19 pandemic. Demand for personal computers, tablets, and video game consoles spiked as remote work and social distancing became commonplace. Initially, limited memory chip supplies led to higher prices, but manufacturers eventually overcorrected, and prices fell as consumer behavior normalized in 2022 and 2023.

What happened to memory chip stocks? Sandisk was a subsidiary of Western Digital until early 2025, so no company-specific information is available. But shares of Western Digital and Micron dropped 60% and 50%, respectively, from their 2022 levels. Both memory chip companies reported negative earnings in 2023. And neither stock achieved a new high until 2024.

This time around, Wall Street expects memory chip sales to peak in 2028. After that, Micron's adjusted earnings are projected to decline 27% in fiscal 2029 (ends in August), and Sandisk's adjusted earnings are projected to decline 54% in fiscal 2029 (ends in June).

Today, Micron trades at 24 times earnings, while Sandisk trades at 67 times earnings. Both multiples seem reasonable when compared to the companies' reported earnings growth. But investors need to account for a potential decrease in earnings in the next few years. In that context, both stocks could drop sharply when the current memory chip cycle passes its peak.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Micron Technology, and Western Digital. The Motley Fool has a disclosure policy.