Micron Technology and SanDisk Corp are trading at the lowest forward earnings multiples in the Nasdaq 100, even after significant rallies earlier this year. The decline in valuation comes as both stocks experience sharp corrections in July, raising questions about whether the current multiples represent a discount or a warning sign of future earnings declines.

Micron Technology trades at 6.2 times forward earnings, making it the second-cheapest stock in the index behind Strategy Inc. The stock is down 23.3% month-to-date in July, putting it on pace for its worst month since June 2022. Despite the recent pullback, the stock is still up 208% in 2026, following a rally of nearly 2,000% from its 2025 lows to its June highs.

SanDisk Corp has experienced an even steeper decline, falling 35.7% this month and 24.7% this week alone. This represents its worst weekly drop since March 2025. The stock currently sits at 8.1 times forward earnings but remains up 504% year-to-date.

Historical Context and Market Cycles

Memory is considered the most cyclical sector within semiconductors. The construction of new fabrication plants requires two to three years and tens of billions of dollars, often resulting in supply arriving late to meet demand. Historically, a collapsing forward multiple has served as a warning rather than a discount, signaling that the market expects underlying earnings to fall further.

Micron Technology previously peaked near $64 in May 2018 at roughly 4.5 times forward earnings during a highly profitable period. The stock subsequently fell 57% by December as DRAM prices declined, and revenue dropped 23% the following year. In that instance, the low multiple was pricing the peak rather than offering value.

The Bull Case for AI Demand

The current bull case argues that this cycle will deviate from historical patterns due to structural demand for artificial intelligence. High-bandwidth memory is reportedly contracted years in advance at locked prices and is effectively sold out. Previous market busts originated in the spot market, a factor that proponents believe differentiates the current environment. If AI demand proves to be structural, these stocks may warrant higher multiples rather than the compressed valuations currently observed.

Nancy Tengler, CEO and CIO of Laffer Tengler Investments, believes that understanding Micron Technology's current trajectory requires looking beyond traditional memory market cycles. Instead, she suggests that Microsoft's Azure business offers a more relevant framework for anticipating the company's future growth and margin profile. Tengler argues that while margins may normalize from current record highs, this shift should not necessarily be viewed as a negative indicator for the stock's long-term performance.

Azure's Playbook

Tengler acknowledged that Micron's industry-leading margins may not remain at current levels, but argued that margin normalization shouldn't automatically be viewed as a warning sign. "Am I concerned that margins could go down to 70%?" Tengler asked. "The market will hate it, but this is what happened with Microsoft during the launch and momentum of Azure. There was a time when Azure was growing at 92%, and the stock continued to outperform for a number of years even after growth began decelerating. That’s the law of large numbers."

The comparison is less about Microsoft's cloud business and more about how investors tend to react when hypergrowth inevitably slows. As businesses scale, maintaining triple-digit growth or record profitability becomes mathematically harder. Markets often interpret that slowdown as the beginning of the end, even when the underlying business continues to strengthen. Tengler argues Micron could be entering a similar phase.

Why Micron's Story May Be Different This Time

The portfolio manager also pointed to another development she believes investors shouldn't overlook. "I don’t view it too seriously when I look at a company like Micron, which is now signing three-year contracts and has margins of 84%," she said.

For decades, memory stocks have been known for sharp boom-and-bust cycles driven by supply gluts and volatile pricing. Multi-year supply agreements with AI customers could signal a more durable demand environment, reducing some of the earnings volatility that has historically defined the industry. That doesn't mean Micron is immune to cyclical pressures. Instead, Tengler believes investors should focus less on whether margins retreat from today's extraordinary levels and more on whether AI demand continues to create a structurally larger market for high-bandwidth memory and advanced DRAM products.

Looking Beyond The Next Quarter

Tengler also pushed back against concerns surrounding heavy AI investment across the technology sector, arguing that capital spending funded by strong cash generation should be viewed differently than debt-driven expansion. "I think capex spending is a sign of strength… you still have some of these mega-cap companies generating tens of billions of dollars in free cash flow every year, even after spending tens of billions of dollars."

That philosophy extends to Micron. Rather than chasing the stock after its recent run, Tengler said volatility should be expected during what she described as the "fourth industrial revolution." "I think you use it as an opportunity if you’re a long-term believer… I’m not going to chase it here, but if it continues to decline, we will, in fact, step in." Her broader message is that investors may be asking the wrong question. Instead of trying to pinpoint when Micron's margins peak, Tengler suggests looking at how other transformative AI businesses have evolved. If Microsoft's Azure story is any guide, slowing growth and moderating margins may be less a sign of fading momentum than the natural price of becoming much bigger.