Morgan Stanley and Bank of America betting on memory giants?
Despite the recent decline in memory prices and market concerns, Morgan Stanley chooses to reconfirm its 'overweight' recommendation for Micron and SanDisk stocks.
Analysts explain that the recent sell-offs are mainly due to investor fear regarding high capital expenditures or a decline in demand.
However, they expect these stocks to continue to surprise positively and show stronger-than-expected performance.
The main reason for optimism is that memory has become a 'bottleneck' in the artificial intelligence industry.
This concept describes a component that slows down the entire system because it cannot keep up, and without fast and available memory, it is not truly possible to run advanced AI models.
In addition, the shortage is so severe that customers are already paying in advance to ensure they receive the goods on time, which indicates the strength of demand.
SanDisk's numbers:
Morgan Stanley expects the company to have earnings per share of $41.82 in 2026.
The stock is currently trading at a price to earnings ratio of only about 4 (this is the metric representing the ratio between the stock price and its annual earnings)
Such a multiple is considered relatively low compared to the earnings SanDisk generates.
Bank of America's forecast:
The bank maintains a 'buy' recommendation with an impressive price target of $900 per share.
Analysts met with the company's management and gained significant confidence in continued demand from large cloud companies.
Management also clarifies that it does not intend to flood the market with unnecessary production, but will focus on more profitable products intended for data centers.
The efficiency paradox:
A concern arose that new Google technologies would reduce the need for memory
but the company explains that this is where 'Jevons paradox' comes into play: this is a situation where the more efficient and cheaper a resource becomes, the more its use actually increases because it becomes accessible to everyone.
Therefore, technological improvements will only increase the need for memory in the long term.
The company expects to start seeing significant revenue from its new eSSD products (fast storage drives for businesses) as early as the second half of 2026, which will allow it to capture a larger market share in the industry's most profitable segment.
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