What Happened?
A number of stocks jumped in the afternoon session after worries about a global chip shortage reached parabolic territory driven by AI optimism and strong investor momentum.
Micron posted its best weekly gain in years and Samsung crossed the $1 trillion market capitalization. DRAM contract prices rose significantly in Q2 2026, with cloud companies locking in 2027 supply from memory producers. Bernstein issued a bullish note on memory stock, citing structural supply-demand imbalance. Memory chips, DRAM and NAND, store data inside every computing device, from phones to AI servers.
The AI buildout requires far more memory per server than conventional cloud computing, outpacing production capacity. Micron, Samsung, and SK Hynix together produce over 90% of the world's DRAM. When their combined supply cannot meet AI-driven demand, prices and margins expand rapidly. The shortage entered deficit territory in 2025 and is not expected to resolve until 2027 at the earliest, making the move a structural story, not a one-day trade.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Memory Semiconductors company Seagate (NASDAQ: STX) jumped 6.6%. Is now the time to buy Seagate? Access our full analysis report here, it’s free.
- Memory Semiconductors company Western Digital (NASDAQ: WDC) jumped 7.8%. Is now the time to buy Western Digital? Access our full analysis report here, it’s free.
Zooming In On Western Digital (WDC)
Western Digital’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 5.4% on the news that the stock continued to rally as the company reported a strong fiscal third-quarter earnings report that significantly exceeded analyst expectations, driven by surging demand for its products.
A key factor in the strong performance was the high demand for high-capacity hard disk drives (HDDs) used in artificial intelligence (AI) applications, with management indicating that its HDD capacity for 2026 is already fully committed.
Bolstering investor confidence, Western Digital's leadership announced a 20% increase in the company's quarterly dividend.
Following the impressive results, several financial analysts raised their price targets for the stock, reflecting a more positive outlook on the company's AI-focused strategy and financial health.
Western Digital is up 173% since the beginning of the year, and at $513.21 per share, has set a new 52-week high. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $7,530.
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