Under the AI wave, the "Big Seven" lose their luster, and the memory storage sector becomes a new favorite in the U.S. stock market with a strong rise

In the context of increased overall volatility in the U.S. stock market, the memory and storage sector has become one of the few bright spots. Although the S&P 500 index has fallen about 4.5% this year, companies like SanDisk, Western Digital, and Seagate Technology have continued to strengthen in stock price, becoming an important force supporting the index. This phenomenon is closely related to the strong demand from the AI industry for hardware infrastructure, as the industry logic is undergoing profound changes.

The wave of data center construction has become the core driving force behind memory demand. As AI super cloud vendors continue to increase their investment in computing power, the consumption of memory and storage components has shown exponential growth. Rob Thummel, Senior Portfolio Manager at Tortoise Capital, pointed out that the current market has formed an investment paradigm of “heavy assets, low elimination rates,” with funds shifting from traditional tech stocks to the infrastructure sector. The AI-themed ETF managed by the firm heavily holds stocks of Western Digital, Seagate, and others, significantly outperforming the broader market this year.

Under the pattern of supply and demand imbalance, memory manufacturers’ pricing power has significantly increased. Jamie Zakalik, an analyst at Neuberger Berman, stated that unlike the traditional hardware market, the demand for memory from AI applications has a persistent characteristic, which alters the cyclical nature of the industry. Micron Technology’s latest financial report shows that AI-related business revenue now accounts for over 30%, and strong performance guidance has triggered a reassessment of the industry’s prosperity by the market. Despite short-term stock price fluctuations, there has still been a nearly 40% increase this year.

The performance divergence among leading companies confirms the industry transformation. SanDisk, benefiting from its first-mover advantage in AI storage, has seen its stock price rise over 1850% since February 2025, setting a historical record for S&P 500 component stocks. Western Digital and Seagate Technology follow closely, ranking among the top twenty in annual gains. In stark contrast, software service companies represented by the “seven giants” have collectively come under pressure, with their combined index falling about 10% this year, reflecting a profound shift in the flow of funds.

The game of technological iteration and capacity expansion continues. Ann Miletti, Chief Investment Officer at Allspring Global Investments, cautioned that the current rise in memory prices is primarily driven by supply shortages, a situation that will eventually ease as new capacity is released. However, the continued investments from massive cloud vendors inject long-term confidence into the industry, and NVIDIA CEO Jensen Huang’s prediction that the AI chip market will reach a trillion-dollar scale further strengthens market expectations for hardware infrastructure demand.

The valuation logic for the memory sector is being reconstructed. Zakalik analyzed that compared to other segments of the AI industry chain, storage companies have a clearer profit path and stronger risk resistance. Although they cannot be simply defined as “safe assets,” their business models are easier for investors to understand and price. This cognitive shift allows the memory sector to exhibit unique defensive properties during the adjustment cycle of tech stocks.