Why are memory stocks MU, SNDK, and WDC falling despite Nvidia’s results

Memory stocks fell on Thursday despite Nvidia's strong earnings and outlook supporting the broader technology sector.

Micron Technology MU declined 2%, while SanDisk fell 1.7% and Western Digital dropped 2.7% as investors appeared to weigh company-specific factors alongside the continued strength in artificial intelligence demand.

Nvidia reported fiscal second-quarter revenue of $96.22 billion, up 106% from the prior year.

Data-center revenue reached $89 billion, while the company forecast current-quarter revenue of $108 billion, with a possible variance of 2%.

Micron faces test from Nvidia's AI ramp

Nvidia's results are particularly relevant to Micron because high-bandwidth memory (HBM) is used alongside AI accelerators to supply them with data.

Micron began volume shipments of its 36-gigabyte HBM4 during the first quarter for Nvidia's Vera Rubin platform.

The component delivers more than 2.8 terabytes per second of bandwidth and is more than 20% more power efficient than Micron's HBM3E.

Micron's recent financial results also point to significant growth in the memory market.

Fiscal third-quarter revenue rose to $41.46 billion from $23.86 billion in the previous quarter. Operating cash flow more than doubled sequentially to $25.39 billion, while adjusted free cash flow reached $18.3 billion.

Despite these improvements, Micron shares declined on Thursday.

The movement suggests investors may be separating Nvidia's strong AI demand outlook from expectations for Micron's own ability to translate that demand into higher HBM shipments, pricing and margins.

Micron will need to scale shipments as Nvidia's Vera Rubin racks enter full-scale production while also managing conventional memory capacity to avoid a potential surplus.

BMO initiated coverage of Micron with a $1,300 price target on August 20, while Mizuho lowered its target to $1,300 from $1,375 on August 25.

The average price target among 47 analysts surveyed by S&P Global stood at $1,515. Of those analysts, 43 had Buy or Strong Buy recommendations.

Kioxia, SanDisk plan $31B Japan investment

SanDisk stock faced pressure after the company announced massive investment plans.

Kioxia and SanDisk announced plans to invest more than $31 billion in Japan through 2032, subject to government support.

The investments are expected to support infrastructure expansion at Kioxia's Yokkaichi Plant and Kitakami Plant, as well as related technology development.

The companies said the spending is intended to support multi-year flash memory supply growth and address demand for NAND flash memory.

Kioxia and SanDisk said they have invested more than $50 billion in Japan over the past 25 years through their joint venture partnership. In January, the companies extended their joint venture framework at the Yokkaichi Plant through December 2034.

Western Digital also faced pressure on Thursday. Its shares fell 3.6% to $452.

The stocks saw decline after an initial rally in memory and storage stocks after Nvidia's strong forecast. Summit Insights also downgraded Western Digital to Hold from Buy, adding further pressure to the shares.