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Key Points
Memory stocks sold off last week.
Morgan Stanley analyst Joseph Moore thinks this has created a buying opportunity.
The memory chip deficit won't end before 2028.
Three straight days of selling came to a happy end for Sandisk (NASDAQ: SNDK) investors Monday, as the stock turned around and gained 5.6% through 1:45 p.m. ET.
You can thank Morgan Stanley for that.
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Morgan Stanley still loves memory stocks
It's not entirely clear why investors have been selling memory stocks lately -- maybe because Taiwan Semiconductor (NYSE: TSM) said it was expanding semiconductor chip production (although that's probably actually good news for Sandisk) or maybe because investors are worried that demand for artificial intelligence chips is going to decline (although that's the exact opposite of what TSMC told us last week).
Either way, Morgan Stanley analyst Joseph Moore is thanking his lucky stars for the sell-off, and thinks it has created a buying opportunity in semiconductor stocks like Sandisk.
As reported on StreetInsider.com today, Moore admits that "data center strength is the only cause" for this year's incredible demand for memory chips -- but he's not worried that this strength will ebb anytime soon. Shortages of memory chips continue to get worse, not better, and Q3 memory prices are going to be up 25% from Q2, says the analyst.
What this means for Sandisk
Semiconductor stocks are notoriously cyclical, booming when demand and prices are high, only to crash as production increases, supply catches up with demand, and prices fall. That's the way this industry has always worked in the past. It's probably the way it will work in the long-term future.
That said, Moore sees little chance of supply catching up with demand this year, next year, or the year after that. For the time being, Sandisk's profits look safe, and this bodes well for the stock rebounding in the near term.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
