3 AI chip stocks to buy during the sell-off, Nvidia not the top pick

SanDisk, Micron and Advanced Micro Devices have emerged as the top AI chip picks during the sell-off, each offering a distinct angle on the $3 trillion to $4 trillion AI infrastructure buildout.

"We're at the beginning of it, and whatever happened to the stock market, you should be very happy because now you can buy at a discount," Nvidia Chief Executive Officer Jensen Huang told reporters in Seoul on June 8, referring to the broader AI chip pullback.

SanDisk shares have surged 574% year to date but have retreated more than 30% from a June peak, while Micron has gained 266% in the first half. Nvidia, the sector's biggest winner over the past three years with a 978% gain since July 2021, is up just 12% in 2026 — barely ahead of the S&P 500. The divergence reflects a market broadening beyond GPU makers into memory and storage companies that benefit from every AI server deployment.

The pullback has compressed valuations across the sector. SanDisk trades at a forward PEG ratio of 0.11, a 90% discount to the sector median, while Nvidia's forward P/E of 23.6 sits at just a 10% premium to the S&P 500. For investors, the question is whether the sell-off represents a healthy pause in a structural uptrend or the beginning of a mean-reversion cycle.

Memory Stocks Offer the Most Upside

SanDisk has been the standout, with shares surging 726% in the first half — more than double the gain of Micron, the index's second-best performer. The rally reflects a structural shortage in NAND flash memory, where production cuts following the 2023 downturn have left supply constrained against surging AI data center demand.

SanDisk's third-quarter revenue nearly doubled sequentially to $5.95 billion, with non-GAAP gross margin expanding to 78.4% from 51.1%. The company has locked in $42 billion in contract revenues, pre-selling more than a third of its fiscal 2027 chip production. Bernstein SocGen Group raised its price target to $3,000 from $1,700, citing long-term supply agreements that provide downside protection even in a worst-case pricing collapse.

Micron secured a storage chip supply agreement with Tesla, sending shares up 3.2% on July 23. Morgan Stanley called the recent sell-off "a strong entry point" for memory stocks, noting that pricing remains up 25% this quarter.

AMD Challenges Nvidia's AI Dominance

Advanced Micro Devices added Microsoft as a customer for its Helios rack-scale system, positioning the chipmaker as a credible alternative to Nvidia in AI data centers. The win comes ahead of AMD's "Advancing AI" event, where Chief Executive Officer Lisa Su is expected to showcase new products. Bank of America analysts said AMD could offer "greater visibility into 2027 deployments, production ramps and broader hyperscale adoption."

Nvidia remains the dominant force, with record quarterly revenue of $81.6 billion, up 85% year over year. But its stock has gained only 12% in 2026 as investors rotate into names offering more upside from lower valuations. Chief Financial Officer Colette Kress told analysts that AI infrastructure spending is on track to reach $3 trillion to $4 trillion annually by the end of the decade.

For long-term investors, the sell-off has created an opportunity to buy AI chip exposure at compressed valuations. SanDisk's forward PEG of 0.11 suggests the market is pricing in a sharp normalization of memory pricing, yet the company's $42 billion contract backlog provides a buffer most cyclical chip stocks lack. The risk is that hyperscaler capital spending growth decelerates from 76% this year to 25% next year and just 6% in 2028, according to UBS estimates. For now, the structural shortage in memory and AI chips shows no signs of abating.

This article is for informational purposes only and does not constitute investment advice.