AI mania erases cyclical memory: When SanDisk soared 12 times, who still remembers the past crashes?

According to analysis from the UK’s Financial Times, although the current storage chip sector has experienced an unprecedented surge driven by demand for artificial intelligence, the industry’s strong cyclical pattern has not disappeared. In the past six months, SanDisk’s stock price soared 1200%, while Western Digital, Seagate, Micron, and SK Hynix also surged 180% to 280%, becoming the most prominent performers in the S&P 500 index. This wave of gains has triggered market caution: investors may be repeating the mistakes of the 2022 cyclical reversal. The report believes that storage demand driven by AI applications is the core driver of this rally. As memory prices continue to rise, SanDisk has shifted from a cash burn position in 2024 to generating nearly $1 billion in free cash flow last quarter. However, the storage industry is highly cyclical, with demand fluctuating rapidly and capacity adjustments lagging behind, often leading to sharp price swings. The article cites industry insiders warning that "investors have too short a memory." Historical data shows that from mid-2020 to early 2022, Western Digital, Seagate, Micron, and SK Hynix all saw their stock prices rise by over 100%, only to give up all their gains within the following nine months; similar dramatic swings also occurred in 2014 and 2018. The current market optimism is causing people to overlook the lessons of industry cycles. Hyperscale Purchasing and Capacity Expansion May Trigger a New Round of Oversupply Industry analysis points out that the current memory market shows structural risks similar to the 2022 cycle. To compete for cooperation with hyperscale cloud computing vendors, suppliers often purchase memory chips in advance to prove their supply capability before securing confirmed orders. However, not all suppliers ultimately land such contracts, leading to total orders far exceeding real demand. At the same time, hyperscale vendors themselves commonly overestimate future demand. Once they subsequently adjust order volumes, the resulting oversupply rapidly transforms into severe market glut. The report cites industry sources saying that cases where order volumes double or even triple have already emerged, and capacity is also expanding in sync. Recently, Samsung announced a plan to greatly increase its DRAM production capacity, further intensifying potential supply-side pressure. Is this cycle different? Although the storage industry’s inherent cyclical risks remain, market analysis believes this artificial intelligence-driven expansion may last longer than previous ones. Jonathan Goldberg, analyst at Digits to Dollars Advisory, said: "Looking back at history and the last five years, the market will eventually correct. The amplitude of this cycle is greater, so prices may keep rising. Many semiconductor investors who entered the industry within the last five years say this time is different. But in reality, the cycle has not changed." On the other hand, the technological progress of high bandwidth memory (HBM) is regarded as a key variable that could reshape the industry landscape. This dedicated high-performance DRAM market is currently dominated by Samsung, SK Hynix, and Micron. Ben Bajarin, analyst at Creative Strategies, pointed out: "This cycle is largely driven by HBM, which has a higher degree of differentiation and won’t become a commodity in the short term... I think memory revenues have already rebounded from the bottom." The current market stands at the intersection of technological iteration and cyclical rhythms, and the supply-demand dynamics of HBM will be one of the core factors influencing the length and nature of this cycle. Risk Warning and Disclaimer There are risks in the market and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. You alone are responsible for any investment decisions made based on this article.