“There’s no getting around the fact that the next 12 months forward growth is really big, their margins are very good, and it seems like they’re getting better,” said Brian Mulberry, chief market strategist at Zacks Investment Management, which owns many of these stocks. The group’s fundamentals are “absolutely spectacular,” he added.

However, the overall backdrop has become more complicated. Interest rates are rising to a point where investors are worried about the fallout for tech companies, which tend to be sensitive to Treasury yields because their high market valuations are based on growth estimates going out several years.

This risk is particularly acute now because AI spenders are increasingly using the credit market to raise funds, and higher rates increase their financing costs. “The trade is too vulnerable to potential macro issues with rates, with the war, and with oil being elevated, which increases the odds of a rate spike,” said Young at MoneyFlows.

“These macro overhangs are a problem they didn’t have before.” One factor the group has going for it is the shares are relatively inexpensive at time when investors are looking closely at bloated valuations.

3, putting both among the 10 cheapest stocks in the technology-heavy Nasdaq 100 Index. While Western Digital and Seagate have multiples in the mid-20s, they’re not far above the Nasdaq 100 at 22 despite being among the index’s top five performers this year.

That’s part of the reason why Wall Street continues to see gains ahead. Bank of America named Micron one of its “select opportunities” following the selloff in AI infrastructure shares.

The stock’s recent decline is “an enhanced buying opportunity,” analyst Vivek Arya wrote in an Aug. 13 note to clients.

BloombergAnd, while there’s likely more volatility ahead, there are also signs that investors are willing to buy these dips. Shares of Sandisk, for example, rose 2% Thursday after shedding 12% in the previous two sessions, a decline that roughly mirrors the jump after the company’s investor day last week.

“The sector is still trading on positioning while fundamentals keep getting stronger underneath,” said Dave Mazza, chief executive officer of Roundhill Financial, which owns stakes in Sandisk, Western Digital, Micron and Seagate. “When momentum stalled, the selling fed on itself through profit taking, leveraged unwinds and repositioning.

In my opinion, that is very different from the market marking down the fundamentals, which have only improved. And it is why we saw buyers step into the drawdown post the investor day.”

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