Memory Stocks Tumble After Seagate CEO Raises Eyebrows

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Is the AI infra trade starting to crack?

Memory stocks have been one of the most profitable sectors this year as AI continues to eat the world. But a comment from Seagate CEO Dave Mosley on Monday sent the sector tumbling, as some investors warn of too much froth.

“If we took the teams off and started building new factories or bringing up new machines, that would just take too long,” Mosley said at a JP Morgan conference, when asked about ramping up production in Seagate’s facilities. “You would end up with more capacity, but then you’d slow the rate of growth on that technology.”

The comment clearly gave the market jitters, as it’s a rather honest acknowledgement that Seagate, and its AI infra peers, might not be able to meet AI demand. Seagate stock dropped sharply on Monday, before recovering somewhat. It’s down about 2% on Tuesday and over 12% in the last five trading days.

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Other names weren’t spared the blowback, either. Sandisk, the top-performing stock on the S&P 500 last year and a recent entrant to the Nasdaq 100 list, fell nearly 10%. Still, it’s up 394% this year, so there’s clearly plenty of runway. Western Digital is also down about 10%, and Micron is down about 13%, though it’s up about 4% as of mid-afternoon Tuesday.

And the Roundhill Memory ETF (DRAM), which tracks a basket of memory stocks including Micron, Sk Hynix, and Samsung, fell about 8% over the last week, but is up 2% Tuesday. Still, it’s up nearly 82% this year and is the best-performing ETF since it began trading in April.

The memory trade isn’t dead. Some of this was obviously traders taking profits at the first sign of instability, because we can’t be in a bull run forever. Other investors say it’s time to be more judicious in picking winners, too. Kerrisdale Capital revealed a short position in Everspin Technologies, which is up 250% this year, reports Business Insider.

The smart money is starting to pick sides.