Memory and semiconductor stocks rebounded Monday as investors began buying shares that had fallen sharply during the previous week’s technology-sector selloff.
The PHLX Semiconductor Index was nearly 2% higher during recent trading. Marvell Technology and Micron Technology led the advance, with both stocks gaining approximately 5%. Memory and storage companies that had experienced some of the steepest recent declines also recovered, as Sandisk and Western Digital each climbed more than 4%.
The recovery followed a difficult week for the semiconductor industry. The index declined 10% as the powerful memory-stock rally that helped push the broader market to record highs during the second quarter lost momentum.
Selling intensified late in the week after Chinese startup Moonshot AI introduced a new open-source artificial-intelligence model. The model reportedly offers capabilities that compete with leading systems developed by Anthropic and OpenAI.
Its release revived questions about whether major technology companies need to continue spending enormous amounts of money on artificial-intelligence infrastructure. Investors have also become increasingly concerned about whether those companies will eventually generate sufficient returns from their data-center and AI investments.
Despite those concerns, Monday’s rebound indicated that investors remain interested in the memory companies that have played a major role in the artificial-intelligence rally throughout much of 2026.
Morgan Stanley analysts said the recent decline created an attractive opportunity to purchase memory stocks benefiting from chip shortages that continue to show little evidence of ending.
The firm estimated that memory prices have increased approximately 25% during the current quarter. Although that represents slower price growth than in earlier quarters, the analysts described the moderation as unavoidable and potentially necessary.
Prices that rise too quickly can eventually discourage customers from buying as much equipment, delay planned investments or encourage companies to redesign products around less expensive components. A slower and more sustainable increase could therefore help prevent demand from being damaged by excessively high costs.
Demand for memory chips and data-storage equipment used in artificial-intelligence data centers has significantly exceeded available supply over the past year. That imbalance has driven prices higher throughout the technology industry and raised the cost of building advanced computing systems.
Memory manufacturers are responding by expanding production capacity. At the same time, large customers are entering multiyear purchasing agreements intended to guarantee access to important components while providing more predictable pricing.
Some investors are concerned that the combination of additional manufacturing capacity and long-term supply agreements could eventually reduce memory prices and limit the extraordinary earnings growth recently reported by suppliers.
Wall Street is also watching whether memory has become so scarce and expensive that customers begin “de-speccing” their products. That process involves redesigning equipment to reduce the amount or type of memory required.
Morgan Stanley said Nvidia is believed to have reduced the memory included in its computing racks by a meaningful amount. Such changes could limit pricing power at the edges of the market if other companies adopt similar strategies.
The analysts acknowledged that long-term purchasing agreements could reduce the extreme highs and lows traditionally associated with the memory-chip cycle. However, they argued that the agreements could ultimately benefit memory companies by producing several years of steadily rising earnings rather than one unusually profitable year followed by a sharp decline.
A longer period of improving earnings could support stronger stock valuations because investors would have greater confidence that current profits are sustainable.
Morgan Stanley also said efforts to redesign products around memory shortages may reduce price growth slightly, but those efforts demonstrate how important memory has become. Companies would be unlikely to spend the time and money required to redesign sophisticated products unless memory were essential to their operations, supporting the argument that underlying demand remains durable.
The firm continues to believe that AI-accelerator suppliers Nvidia and Broadcom offer the strongest balance between potential return and investment risk. However, Morgan Stanley said memory stocks are quickly becoming more attractive following the severity of their recent declines.
Sandisk shares have fallen approximately 39% since reaching a record high late last month, while Micron has declined about 27% from its recent peak.
Even after those pullbacks, both companies remain substantially higher for the year. Sandisk shares have increased approximately 500% since the beginning of 2026, while Micron has gained about 200%.
Morgan Stanley’s position is that the sharp decline has brought memory-stock valuations closer to an appealing entry point without eliminating the supply shortages, data-center demand and earnings growth that originally supported the rally.
Source: Investopedia
