Micron Technology and SanDisk experienced severe losses last week as investors fled artificial intelligence-related equities, even as Apple's warning about soaring memory-chip prices indicated that supply constraints remain unresolved. Micron dropped roughly 22% for the week, while SanDisk tumbled 27.4%. Both stocks recovered modestly on Friday, with Micron rising 5.12% and SanDisk gaining 3.55%, but those rebounds did little to offset the prior declines.
The sharpest selloff occurred on Thursday, when Micron lost 17.46% and SanDisk fell 22.26%, dragging the Philadelphia Semiconductor Index down approximately 12.25%. The selloff was driven by investors reassessing the financial and political risks associated with the expansion of AI data centers. Democratic gains in the U.S. midterm elections raised concerns about stricter permitting rules, higher electricity costs, and local opposition to new facilities. Additionally, cloud companies' increasing borrowing needs have intensified questions about how quickly investments in computing infrastructure will generate returns.
If data center projects face delays, orders for chips and storage could eventually weaken. That prospect is particularly relevant for suppliers whose valuations assume continued expansion, even when current sales remain robust. Futurum's chief market strategist Shay Boloor argued that AI investment could shift outside the United States if domestic construction slows, according to reporting published by Yahoo Finance on November 5. Such a shift would redistribute demand rather than necessarily eliminate it.
Friday's rebound offered limited relief. Neither the crash nor the recovery indicates that manufacturers' customer orders have suddenly changed. Apple's CEO John Ternus described memory pricing as "unprecedented" during the November 2 earnings call. Apple expects December-quarter gross margins of 45% to 46%, down from 47.9% in September, as memory costs rise further. The September margin included a temporary tariff-refund benefit, so not all the projected decline reflects dearer chips. Still, Apple's warning highlights a supply problem affecting even buyers with significant purchasing power.
AI servers are absorbing advanced manufacturing capacity, squeezing supplies for smartphones and computers. TrendForce forecasts fourth-quarter contract prices for conventional DRAM to rise 10% to 15%, and NAND flash by 15% to 20%. Micron produces both types of memory, while SanDisk concentrates on NAND storage. Higher contract prices can support their revenue and profitability, although long-term agreements may limit immediate gains. AJ Bell analyst Dan Coatsworth warned that Apple devices could become more expensive, which was "not ideal" when consumers were already struggling with living costs.
The financial results from both companies hardly suggest an immediate collapse. Micron reported fiscal fourth-quarter revenue of $54.23 billion, up from $11.32 billion a year earlier, and an 86.8% GAAP gross margin. It forecast roughly $61.5 billion in next-quarter revenue. SanDisk reported fiscal first-quarter revenue of $11.03 billion, up 23% sequentially, with an 85% GAAP gross margin. Its data-center business grew 61% to $4.80 billion, although consumer revenue declined 29%. Management expects revenue of $12.2 billion to $12.6 billion next quarter. SanDisk also plans an eight-for-one stock split, effective November 19, which changes per-share prices without increasing the company's value.
Bernstein analyst Stacy Rasgon retained a bullish $3,000 pre-split price target for SanDisk, citing tight NAND supply and customer contracts. The selloff has left valuations more attractive, but the market remains cautious about the sustainability of AI-driven demand. The contrast between strong earnings and falling stock prices suggests that investors are focusing on potential risks rather than current fundamentals.
As the AI selloff continues, the question of whether it has gone too far remains open. The memory chip sector's fundamentals appear solid, with rising prices and robust demand from data centers. However, political and financial uncertainties could still weigh on sentiment. For now, the market is watching for signs of whether the recent decline represents a correction or the start of a longer-term trend.
This article is for informational purposes only and does not constitute financial advice.
