By Teresa Rivas
Amid artificial intelligence concerns, chips are one area that aren't feeling the crunch.
Although the war in Iran has understandably grabbed headlines, investors remain wary about AI. Nvidia is down nearly 6% this year, while the Roundhill Magnificent Seven exchange-traded fund is off 10.5%. Though the iShares Expanded Tech-Software Sector ETF has rebounded a bit from its worse losses, it's still off more than 23% since the year began. The Nasdaq Composite is the worst performer of the three major indexes so far in 2026, and is down 6%.
Yet memory makers, for the most part, have soared above the fray.
Investors may be skeptical of these gains, given the historically boom-bust nature of the industry, but at least near-term, the setup looks robust, wrote Yardeni Research President Ed Yardeni in a note.
"Demand for memory is expected to remain elevated into 2027--28 before normalizing as supply catches up. Hyperscaler orders placed well in advance have effectively pulled forward demand visibility, while long lead times for fabs and equipment limit the speed of supply responses," he said.
So far this year, Samsung Electronics is up some 58%, SK Hynix is up 45%, Micron Technology is up 38%, Western Digital is up 69%, and Sandisk is up almost 200%. The latter is especially impressive, since it debuted publicly only 13 months ago, with the stock skyrocketing 1,800% in that span, Yardeni noted. Samsung Electronics and SK Hynix alone now account for about 43% of the iShares MSCI South Korea ETF.
Every investor knows the four most expensive words they can utter are "it's different this time" -- and it's unlikely that memory makers can entirely leave their cyclical history behind. Nonetheless, it's worth exploring whether or not future cycles will be as much of a rollercoaster ride as they once were.
Micron is a good example, Yardeni wrote. Although the shares fell following its "exceptional" second quarter and "stunning" guidance, as Barron's characterized them, the results demonstrated why the shares have surged this year. The company cleared a high bar, margins expanded impressively, and management noted that demand for dynamic random access memory $(DRAM)$ and NAND flash memory remains high despite constrained supply.
Yardeni thinks photonics are one of the more underappreciated stories in memory. Photonic memory uses light, or photons, rather than electrons, making it more energy-efficient and faster, among other benefits. "As clusters scale, data transfer speeds are becoming a limiting factor, increasing the importance of optical components and materials," he wrote. He listed AXT, Lumentum, Coherent, and Fabrinet as companies primed to benefit from photonics demand -- they've already outperformed so far this year.
Of course, some investors may prefer to bargain hunt, in which memory might not be the best area to look at. Deutsche Bank analyst Ross Seymore wrote in a research note that memory and semiconductor capital equipment are looking pricey, adding that the rise is not "unwarranted -- in fact, we think investor conviction in these names is well-founded given the extremely attractive market conditions." However, he said that elsewhere, there are "puzzling dislocations in relative valuation across the sector to help investors identify opportunities in parts of the market that may currently be out of favor."
To that end, processors are the cheapest group on a relative basis, trading on average 22% below historical averages. Nvidia, Marvel Technology, Broadcom, and Advanced Micro Devices are some of the big standouts.
Yet with memory supplies so constrained, expect those stocks to remain top of mind for investors.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2026 13:21 ET (17:21 GMT)
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