One of the biggest outperforming themes in global equity markets in 2025 was memory and storage stocks, and that trend has carried into the start of 2026, even as investors begin to question how long the momentum can continue. These companies — traditionally seen as cyclical and less exciting than megacap tech — became top performers last year as rapid expansion in artificial intelligence infrastructure drove surging demand for memory and related components.

At the forefront of this move were names such as Sandisk, Western Digital, Seagate Technology and Micron Technology. Sandisk in particular was the standout, rallying more than 500 per cent in 2025 on heavy institutional and retail interest tied to AI-data centre build-outs. Early trading in 2026 has continued to show strong gains — Sandisk rallied sharply in the first few sessions and remains well above its prior year’s level — while other memory and storage stocks have posted double-digit percentage increases in recent weeks.

The rally has been driven by massive capital expenditure on AI infrastructure, which has translated into heightened demand for memory chips, solid-state storage and other data-centric hardware. As cloud providers and enterprise customers build out capacity to support new AI workloads, memory suppliers and storage specialists stand to benefit disproportionately, underpinning the sector’s outperformance versus the broader market.

However, some market strategists are now signalling that the sheer size of the gains could reflect a degree of over-extrapolation. Because memory and storage are historically cyclical industries — sensitive to inventory swings and capacity adjustments — there’s a risk that current valuations may already incorporate too much future demand growth. If AI capital spending cools or overcapacity emerges, pricing pressure and cyclical downturns could hit earnings.

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Another point of caution centres on forecasting difficulty: with AI-linked demand evolving in real time, traditional models struggle to accurately predict long-term growth trajectories for these companies. That uncertainty can make it harder for investors to distinguish between sustainable fundamental upside and short-term speculative positioning.

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In summary, while memory and storage stocks remain among 2025’s top trades and continue to outperform in early 2026, the pace of gains has led some analysts to question whether structural demand can keep justifying current price levels over the long term. The theme reflects powerful sector-specific drivers tied to AI infrastructure, but it also underscores the risks of chasing high-momentum trades without clear visibility into future capacity cycles and demand patterns.