Memory Stocks Tumble Despite Strong Earnings
SanDisk and Western Digital both plunged roughly 10% in early trading Wednesday, even after reporting robust quarterly results. The sell-off signals that investors are questioning whether the AI-driven memory boom has peaked, with capital potentially rotating into cryptocurrencies like bitcoin.
SanDisk reported adjusted earnings per share of $2.22, beating estimates of $2.00, while revenue came in at $2.5 billion, above the $2.3 billion consensus. Western Digital also topped expectations with EPS of $2.06 versus $1.85 expected, and revenue of $4.1 billion against $4.0 billion forecast. Despite these beats, both stocks fell sharply, a classic “sell the news” reaction.
Why AI Memory Demand May Be Losing Momentum
The memory chip sector has been a prime beneficiary of the AI boom, with data center demand for NAND and HDD storage soaring. However, recent commentary suggests that hyperscalers are pausing or reallocating capital. For instance, Microsoft and Amazon have signaled more cautious data center spending in 2025, which could reduce near-term memory orders.
SanDisk’s guidance for the next quarter implied sequential revenue growth of only 2-4%, a slowdown from the double-digit growth seen earlier this year. Western Digital similarly guided for flat to slightly down revenue in the current quarter. These muted outlooks, despite strong current results, are fueling fears that the AI memory cycle is maturing faster than expected.
Bitcoin’s Bid as Capital Rotates
As memory stocks lose their luster, some traders are pointing to bitcoin’s recent resilience as evidence of rotation. Bitcoin has climbed 8% over the past week, breaking above $67,000, while the broader equity market has been choppy. The correlation between crypto and AI-related tech stocks has been negative over the past month, suggesting funds are moving out of crowded AI trades into digital assets.
This rotation is not just anecdotal. Exchange-traded fund flows show that bitcoin ETFs have attracted $1.2 billion in net inflows over the last two weeks, while tech sector funds saw outflows of $500 million. The move suggests that institutional investors are seeking alternative growth stories, particularly as the Federal Reserve signals potential rate cuts later this year, which historically benefits risk assets like crypto.
What Would Reverse The Sell-Off
For memory stocks to recover, they would need to deliver a clearer acceleration in AI-related orders. Key catalysts include upcoming earnings from major cloud providers and any announcements of new data center builds. If Q3 guidance from companies like Micron shows stronger-than-expected demand, it could stabilize the sector.
On the crypto side, the key number to watch is bitcoin’s ability to hold above $70,000. A sustained breakout above that level would confirm the rotation thesis, while a drop below $60,000 would signal that the move is just a temporary bounce. Additionally, the next Federal Reserve meeting on September 17 will be crucial; a dovish stance could turbocharge the shift into bitcoin.
Investors should also monitor the upcoming earnings from Nvidia, which are due later this month. Nvidia’s outlook for AI infrastructure spending will either validate or undermine the memory sector’s narrative. If Nvidia disappoints, expect further selling in memory stocks and potentially more upside for crypto.
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