Memory chip index surges 4.8% as AI demand tightens supply

The memory chip index rose 4.77% to 223.19 points Monday, breaking above its 50-day moving average as AI-driven demand tightens supply. The gauge has climbed 21.21% over five consecutive sessions after falling below its 100-day moving average on July 28-29.

"DRAM and NAND industry demand continues to significantly exceed industry supply," Sanjay Mehrotra, chief executive officer at Micron Technology, said on the company's fiscal third-quarter earnings call. Micron Chief Business Officer Sumit Sadana added that customers increasingly identify DRAM as their primary constraint, ahead of power and data-center capacity.

SanDisk led the advance, jumping 8.88%, while Teradyne, Applied Materials, and Western Digital each rose at least 5.35%. Micron, Lam Research, SK Hynix ADR, and Seagate Technology each gained at least 2.19%, while Rambus slipped 0.24%. Micron shares climbed 5% to $1,017, back above $1,000 for the first time since July 23, while SanDisk traded at $1,778 and Western Digital at $540.

The rally follows Tesla chief executive officer Elon Musk flagging memory as the binding constraint on AI development, layered on top of SanDisk's Aug. 13 investor day and a fresh round of analyst price target hikes. South Korea's KOSPI rose 2% overnight, adding regional lift for a group heavily influenced by Asian memory makers.

SanDisk Targets 80% Gross Margins Through 2030

SanDisk laid out a long-term financial framework targeting 80% gross margins and 50% adjusted free cash flow margins for fiscal 2028 through 2030, leaning on BiCS10 QLC and High Bandwidth Flash technology aimed at AI workloads. The company also said it will return 100% of remaining cash to shareholders after completing business investments over the next three years. RBC Capital Markets raised its SanDisk price target to $1,600, Wells Fargo lifted its target to $1,550, and New Street upgraded Micron to Buy with a $1,250 target. Bank of America reiterated a Buy on Micron with a $1,550 target, projecting fiscal 2030 earnings per share of $200 to $250 against a Street consensus peak of $160 to $170.

ETF, Cross-Asset Signals

The Roundhill Memory ETF gained 5% to $60.20, up 106% since its April 2 debut. SanDisk is up 591% year to date, Western Digital 196%, and Seagate 254%. Spot gold traded near $4,400 as investors scaled back bets on a near-term Federal Reserve rate hike, while Nasdaq 100 futures rose 0.54% in pre-market trading.

The rally also drew support from reports that the Trump administration is discouraging US tech firms from sourcing conventional memory chips from Chinese suppliers, a move that could further tighten supply. US Commerce Secretary Howard Lutnick said the administration discourages Apple from sourcing memory chips from China.

The memory trade remains 15% to 30% below June highs after a July pullback driven by profit-taking and concerns about more efficient models out of China. Much of the multi-year demand outlook is already priced in, creating resistance to further gains. Whether Micron can hold above $1,000 and whether neutral-rated target hikes convert into upgrades will set the tone for the next leg. Micron's fiscal fourth-quarter earnings, due in the coming weeks, will provide the next major test of the supply-demand thesis.

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