Micron Technology (NASDAQ: MU) and Sandisk (NASDAQ: SNDK) have recorded stunning gains on the stock market over the past year, primarily due to the favorable conditions in the memory market, where demand is substantially outpacing supply.
While Micron stock has jumped 728% during this period, Sandisk’s gains are even more phenomenal at over 3,200%. However, both memory stocks have pulled back significantly. Shares of Micron are down by 24% over the past month, while Sandisk has taken a bigger hit by sliding 38%.
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However, the pullback in these stocks seems like a solid buying opportunity for investors. But if you had to choose one of these semiconductor stocks for your portfolio right now, which one should you be buying? Let’s find out.
Sandisk and Micron’s incredible growth is sustainable
Sandisk and Micron’s earnings and revenue have increased at an exponential pace in recent quarters. This is primarily due to the artificial intelligence (AI)-fueled demand for memory chips in data centers. Morgan Stanley notes that memory chip prices have jumped by 6x over the past year, as demand has significantly exceeded supply.
The investment bank also points out that the memory supply crunch won’t ease anytime soon despite new capacity additions. Memory manufacturer SK Hynix corroborated Morgan Stanley’s concerns earlier this month, pointing out that memory demand will outstrip supply beyond 2030. So, it won’t be surprising to see the strong pricing environment that’s supporting Sandisk and Micron’s remarkable growth continuing.
Even better, both companies are setting themselves up for durable long-term growth, as evidenced by the long-term agreements they are signing with customers. Micron, for instance, noted on the June earnings call that it has signed 16 strategic customer agreements (SCAs), which have significantly increased its remaining performance obligations (RPO).
Specifically, Micron had $5 billion in RPO at the end of fiscal Q3, which ended in May. However, its RPO ballooned to $100 billion by the end of June, as customers scrambled to secure long-term memory supply. That number is likely to have increased further this month, as the company recently announced that it has signed SCAs with multiple companies serving the automotive industry.
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