Believe the unbelievable in this market — things can be different this time
Believe the Unbelievable in This Market
The stock market has been a rollercoaster ride of surprises, with companies defying expectations and delivering astonishing year-to-date performances. Take, for instance, the storage and memory giants SanDisk, Seagate, Micron, and Western Digital. These companies have been on a tear, with SanDisk up 496%, Seagate up 238%, Micron up 208%, and Western Digital up 171%. This is no ordinary growth spurt, as these companies have a history of spectacular gains followed by equally spectacular losses.
The key to their success lies in their adoption of a new business model, which involves long-term supply agreements that have brought an end to the cutthroat competition that once plagued the industry. SanDisk, Seagate, and Western Digital have all committed to disciplined practices, with a significant portion of their profits going towards share buybacks. SanDisk has a whopping $6 billion buyback program, while Seagate and Western Digital have $5 billion and $4 billion programs, respectively. Micron, on the other hand, has opted out of buybacks, choosing instead to focus on growth.
The results have been nothing short of astonishing. SanDisk's non-GAAP gross margin has soared to 47%, a record high, while Western Digital's has reached 51%. Micron's non-GAAP gross margin has also seen a significant increase, from 30% to 85%. These companies have transformed themselves into industry leaders, with market caps to match. SanDisk boasts a $244 billion market cap, while Seagate and Western Digital have $220 billion and $195 billion, respectively. Micron's market value has skyrocketed to $1 trillion.
Despite their remarkable growth, these companies remain the most hated and feared stocks in the market. Investors are skeptical about the sustainability of their agreements with customers and worry that Samsung or other semiconductor capital equipment companies will find ways to disrupt their dominance. However, the data suggests that these concerns are unfounded. The discipline and cooperation among these companies have created a stable and profitable industry.
As a subscriber to the CNBC Investing Club with Jim Cramer, I have been following the remarkable turnaround of these companies closely. We recently bought a position in Micron, despite its high valuation, due to its growth potential and the company's commitment to discipline. While I acknowledge the risks, I believe that these companies offer an opportunity that is too great to pass up.
The data center build-out, driven by companies like Amazon, has created a gold rush that has transformed these companies into winners. The revenue generated by data centers is staggering, with Anthropic announcing over $11.5 billion in revenue for the quarter. The opportunities for these companies are too great to ignore, and I firmly believe that owning one of these stocks is a smart investment decision.
Investing in a New Era
As we navigate this new era of data center growth, it's essential to be open-minded and willing to challenge conventional wisdom. The traditional approach of selling in May and going away is no longer applicable, as the data center build-out has created a new landscape of opportunities. The companies that have emerged as leaders in this space, such as Seagate, Western Digital, Micron, and SanDisk, offer a chance to participate in a lucrative and growing industry.
The CNBC Investing Club with Jim Cramer has been a valuable resource in navigating this complex and rapidly changing market. As a subscriber, I have access to timely trade alerts and expert analysis that has helped me make informed investment decisions. With the exception of Nvidia and AMD, these companies are perhaps the most indispensable in the data center build-out, and I firmly believe that owning one of them is a smart investment strategy.
As I said at our Club's August Monthly Meeting, it's time to free ourselves from the constraints of traditional thinking and recognize that sometimes, this time really is different. The opportunity presented by these companies is too great to ignore, and I encourage investors to take a closer look at Seagate, Western Digital, Micron, and SanDisk.
Source: CNBC · 2026-08-16