Western Digital and Silicon Motion stocks plunge 25-40% despite revenue gains

Memory stocks have fallen sharply from their peaks, with many down 30% or more, but two names stand out as bargains in a cooling tech sector.

The sell-off reflects a broad pullback in high-flying AI bets and profit-taking after rapid gains earlier in the year. Western Digital and Silicon Motion have dropped 35% to 40% and 25% respectively, even though their businesses are still growing. That disconnect has caught the eye of investors looking for undervalued plays ahead of the next tech cycle.

Western Digital’s latest earnings tell a strong story. Revenue hit $3.3 billion in its fiscal third quarter, up 45% year over year, and earnings per share nearly doubled. The company guided to $3.65 billion in revenue for the current quarter, with gross margins in the low 50s, showing pricing power across cloud, client, and consumer markets. The stock surged too fast earlier this year, and now it is settling back to a more sustainable level.

Silicon Motion, a smaller supplier of NAND flash controllers, is also on sale. Its net sales reached $342.1 million in the first quarter of 2026, up 23% from the prior quarter and 105% year over year. Shipments of embedded eMMC and UFS controllers jumped more than 30% quarter over quarter and 140% year over year. Yet the stock trades near $246, well below its 52-week high near $355, despite the strong growth.

Other memory giants like SK Hynix and Samsung have also pulled back, with SK Hynix dropping more than 15% in a single day in July. But Western Digital and Silicon Motion offer a better risk-reward mix. Western Digital remains cyclical but is riding AI storage demand with expanding margins and clearer profitability. Silicon Motion provides exposure to a critical niche in the SSD supply chain without the volatility of the biggest players. For investors willing to look past the recent sell-off, these two could be the standout picks in a tough market.