TLDR
- Memory chip stocks rallied Thursday with SanDisk up 5%, Seagate up 5.87%, and Western Digital up 3.78% after Kioxia issued strong guidance pointing to continued AI data center demand
- Kioxia reported customers securing memory supply contracts for 2027-2028, two years ahead of normal one-year advance booking cycles, indicating tight supply through 2026
- Micron started shipping next-generation HBM4 memory chips ahead of schedule, reinforcing expectations of supply constraints and elevated pricing
- NAND flash memory prices are rising sharply due to shortages as manufacturers shifted capacity to high-bandwidth memory for AI chips while data center storage demand surged
- SanDisk trades at 15x forward P/E for fiscal 2026 despite recent 14% pullback from February highs, with analysts viewing the dip as a buying opportunity
Memory chip stocks rallied Thursday after Japanese manufacturer Kioxia issued guidance that suggests the flash memory shortage may last longer than expected. SanDisk climbed 5.16% to lead the gains.
Kioxia, a major NAND flash storage producer, forecast full-year sales and operating income above analyst expectations. The company projected fourth-quarter revenue of about ¥890 billion and adjusted net income of roughly ¥340 billion, both beating estimates.
The guidance sparked buying across the memory sector. Seagate Technology rose 5.87%, Western Digital gained 3.78%, and Micron added 0.88%.
The rally came as Kioxia revealed something unusual about customer behavior. Some buyers are already trying to lock in supply contracts for 2027 and 2028. Memory contracts are normally signed just one year in advance.
This early scrambling for supply suggests companies expect the shortage to persist. Kioxia’s CFO Hideki Hanazawa said tight supply is driving sharp increases in selling prices.
Micron announced it started shipping next-generation HBM4 memory chips ahead of schedule. The early shipments reinforce expectations that supply will remain tight through 2026.
Why Memory Prices Keep Rising
The memory market operates on simple supply and demand. When chips are scarce, prices rise. When there’s a glut, prices crash.
Right now, the market is in shortage mode. The reason traces back to decisions made during the pandemic’s aftermath.
A few years ago, memory makers overbuilt capacity after strong pandemic electronics demand. The resulting oversupply sent NAND prices crashing. Gross margins went negative.
Companies responded by slashing NAND production. They redirected factory capacity to DRAM and high-bandwidth memory instead. HBM became critical for AI chips and offered better profit margins.
Then AI data centers started buying massive quantities of NAND-based solid-state drives for storing training data. With production cut and demand surging, a shortage developed.
Customers are now securing supply years ahead because they expect demand to stay strong. Companies continue building AI infrastructure that requires large storage capacity.
SanDisk’s Market Position
SanDisk moved the most Thursday because it manufactures NAND chips through a joint venture with Kioxia. The company has direct exposure to pricing.
Western Digital and Seagate, which sell storage products for data centers, typically move with memory pricing expectations.
SanDisk stock sits about 14% below its February highs despite Thursday’s gain. The stock trades at 15 times forward earnings estimates for fiscal 2026 and just over 7.5 times fiscal 2027 estimates.
The company posted 61% revenue growth last quarter. Gross margins expanded from 32.3% a year ago to 50.9%. Adjusted earnings per share jumped fivefold.
Memory stocks had cooled earlier this year after a strong rally. Kioxia’s update reassured investors that elevated chip prices may continue supporting profits.
The NAND market appears to be shifting from cyclical to structural growth driven by AI data center demand. SanDisk remains one of the few pure-play investments in flash memory after spinning off from Western Digital about a year ago.
Kioxia’s guidance suggests the tight supply conditions and rising prices that have benefited memory makers will extend into 2027 and possibly 2028 based on customer booking patterns.
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