The boring end of IT hardware has started printing money, and memory and storage shares are soaring as investors chase “insatiable” chip demand and a supply squeeze.
Data storage firms have been treated like the dull cousin of the tech rally, but prices have jumped as the AI infrastructure build-out is tipped to top $500bn this year.
That has happened while the megacap tech surge has lost steam, leaving traders hunting for the next bit of the stack to pump.
SanDisk shares have nearly doubled since the start of January and are up almost 1,100 per cent since August last year.
Micron and Western Digital have tripled in the same stretch, and Korean chipmaker SK Hynix has done the same.
The moves have dropped billions of dollars into hedge funds such as DE Shaw and Arrowstreet Capital, who clearly did not fancy sitting this one out.
Pictet Asset Management, multi-asset strategist Arun Sai said, “By any measure, that’s an eye-watering few months. The narrative [in the AI rally] has shifted to memory being the choke point in the sustained AI capex build-out.”
Micron, SK Hynix and Samsung make the fast solid-state memory chips that feed data to Nvidia processors running large AI systems, including the models behind OpenAI’s ChatGPT.
As AI models get more complex, the data they consume and produce is exploding, boosting sales of flash storage from outfits like SanDisk. Because this memory is pricey, AI’s appetite is also boosting demand for old-school storage such as Western Digital and Seagate’s magnetic hard disc drives.
Arm, chief executive Rene Haas told the FT, “The use for this high-bandwidth memory in AI has just exploded. There is an insatiable need”.
Memory is a famously cyclical business that swings from shortage to glut, and manufacturers are not rushing to add capacity given the cost and time of new fabs.
Janus Henderson, tech portfolio manager Richard Clode said: “Like any other commodity, you end up with pricing just going berserk.”
The hunt for new AI winners comes as the long rally in megacap tech has petered out after a mid-November sell-off driven by valuation jitters and heavy spending.
Nvidia is still 11 per cent below its October peak after the run that made it the first $5tn company last year.
Among the hyperscalers building vast data centres, including Oracle, Meta, Microsoft and Amazon, Alphabet is the only one to hit new highs since November.
