In the first half of this year,$SanDisk (SNDK.US)$、$Micron Technology (MU.US)$、$Seagate Technology (STX.US)$and$Western Digital (WDC.US)$They were once among the best-performing stocks in the U.S. equity market, as demand driven by AI infrastructure development seemed boundless.
However, since then, market sentiment has shifted, putting pressure on the stock prices of AI‑related component manufacturers such as semiconductor and memory firms, as investors have begun to question whether their massive spending commitments can be sustained. Consequently, SanDisk, Micron, Seagate, and Western Digital all ranked among the worst performers in the second half of 2026.$S&P 500 Index (.SPX.US)$The bottom 10% of constituent stocks, even if their earnings significantly exceed expectations, will still be insufficient to reverse this trend.
Joe Tigay, portfolio manager at Equity Armor Investments, said: "The market is signaling that investors' expectations regarding how long these companies' earnings boom will last are shifting."
Last week, this trend was particularly pronounced. Western Digital posted quarterly results and guidance on Thursday evening that far exceeded expectations and also raised its dividend; however, amid market concerns that AI‑related spending may have peaked, its stock still fell 3% on Friday. At the end of September, Micron reported both profit and revenue that beat estimates, with a outlook that significantly outperformed expectations—but since then, its share price has declined by 15%.
SanDisk is set to report its earnings on Thursday, with earnings per share expected to surge more than 6,100% year over year.
Andre Bakhos, President of Ingenium Analytics, stated: "What will it take to get it back on track? It will require not only strong financial results, but also evidence that this performance can be sustained into the next quarter—and beyond."
AI spending continues to ramp up, with investors placing greater emphasis on returns.
In the short term, the massive AI spending driving these companies' growth does not appear to be slowing down. Last week,$Meta Platforms (META.US)$It has raised its capital expenditure plan for this year. Wall Street expects,$Microsoft (MSFT.US)$、$Amazon (AMZN.US)$and$Alphabet-A (GOOGL.US)$When they release their earnings reports this week, they will either maintain or raise their respective AI spending plans.
On Monday, Anthropic filed its highly anticipated initial public offering (IPO) application, with market expectations that the listing will underscore the enduring resilience of the AI investment boom and boost shares in the memory and storage sectors.
The issue is that investors are growing increasingly skeptical about whether these AI‑related expenditures will deliver returns, especially since a significant portion of the funding now comes from debt. For instance, following Meta's disclosure of its capital‑expenditure outlook, a key measure of its credit risk hit an all‑time high. Coupled with a challenging economic backdrop characterized by high oil prices and elevated interest rates, it's easy to understand why market sentiment has turned bearish.
This also explains why memory and storage stocks, which had been surging all along, have now faltered. Since the start of the third quarter,$SanDisk (SNDK.US)$and$Western Digital (WDC.US)$Their stock prices have all fallen by more than 44%,$Seagate Technology (STX.US)$Down 33%,$Micron Technology (MU.US)$Down 22%. Although this has eroded some of their year-to-date gains, these stocks still posted substantial gains through 2026.
Bakhos stated: "In the past, investors exhibited a highly concentrated 'fear of missing out' mentality toward memory‑chip stocks; today, however, they are weighing the risks associated with these massive capital expenditures and debating whether such investment can be sustained."
In other words, for the rally to persist, these companies will need further validation from major AI spenders. If these key clients can convince investors that their investments are translating into profits, market confidence in memory and storage stocks should strengthen, as this would signal that capital expenditures will remain elevated.
Tigay stated: "In the short term, the fundamental rationale appears broadly intact, but risks are evident, and bearish arguments remain valid. If these major AI spenders fail to meet expectations, demand could plunge sharply."
According to analysts' expectations,$Seagate Technology (STX.US)$and$SanDisk (SNDK.US)$Growth is expected to slow in the coming years. Seagate forecasts revenue growth of approximately 56% for its fiscal year 2027, ending June 2027, before moderating to 37% in fiscal 2028 and 20% in fiscal 2029. Similarly, SanDisk projects a 140% surge in revenue for fiscal 2027, but expects growth to decelerate to 20% in fiscal 2028 and potentially decline by 7% in fiscal 2029.
Undervaluation creates room for upside, but cyclical risks remain to be seen.
For this type of stock, a positive factor is that its valuation is not expensive.$Micron Technology (MU.US)$The stock's forward 12-month P/E ratio is 5x, making it the second-lowest‑P/E stock in the S&P 500, ahead of only…$Charter Communications (CHTR.US)$；$SanDisk (SNDK.US)$Following closely, the forward price-to-earnings ratio is below 6 times.
Meanwhile,$Western Digital (WDC.US)$and$Seagate Technology (STX.US)$Their forward price-to-earnings ratios are approximately 12x and 15x, respectively. The valuations of these companies are all below the broader market average.$S&P 500 Index (.SPX.US)$Its forward price-to-earnings ratio is approximately 19 times, with a heavy weighting in technology stocks.$NASDAQ 100 Index (.NDX.US)$Then it is approximately 20 times.
Although some Wall Street professionals caution that, given the historically cyclical nature of memory demand, such a low price-to-earnings ratio could itself be a red flag, the sheer scale and magnitude of this round of AI infrastructure investment may render traditional cycles less comparable.
Analysts give$Seagate Technology (STX.US)$Jie's target price implies that its share price could rise by more than 70% over the next 12 months.$SanDisk (SNDK.US)$The expected upside exceeds 80%. Data show that among the 74 stocks in the S&P Information Technology sector, Micron, Seagate, SanDisk, and Western Digital all rank among the top seven in terms of potential returns.
Bakhos said, "It's understandable that investors feel nervous when they see a sell-off, because it's unclear whether this marks the peak or merely a temporary release of pressure ahead of a new rally. For now, profit-takers are in the driver's seat, but I believe long-term holders remain well-positioned."
Editor/meiody