Morgan Stanley defends U.S. memory stocks amid selloff

Morgan Stanley analyst Joseph Moore sees the recent selloff in U.S. memory stocks as “a healthy pricing in of durability concerns,” but sees the strength as more durable than the market thinks, with memory supply remaining a gating factor for AI. It has been clear that there is “very positive sentiment on near term results, and very low conviction about the durability of that strength” and the desire to take profits has been evident for a while, argues the analyst, who contends that “looking for sell signals from prior cycles misses the point.” Memory is not just constrained by AI demand, but memory is “increasingly THE primary constraint on AI demand,” the analyst tells investors. Regarding Google’s (GOOGL) “TurboQuant” memory optimization, the firm’s take, after talking to industry contacts, is that “this is an evolutionary development, with basically no surprises for memory,” the analyst added. Annual cash generation at these earnings levels for both Micron (MU) and Sandisk (SNDK) can be 15%-25% of current market caps and “while it won’t last forever, it is going to last for long enough to see the stocks move materially higher,” the analyst concludes.

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