Memory stocks fall after Google TurboQuant buzz but experts say demand story stays strong

Memory stocks saw a sharp and sudden fall on Wednesday. The drop came even as the broader tech market was doing well. This created confusion among investors.

Companies like SanDisk Corporation fell nearly 5%. Micron Technology dropped around 4%. Western Digital declined 3.7%. Seagate Technology also slipped close to 4%.

At the same time, the Nasdaq 100 was trading higher. This made the fall in memory stocks look even more dramatic. It was clear that something specific had triggered this reaction.

The reason traces back to Google and its latest AI update. The company introduced a new compression technique called TurboQuant. This method uses 3 bit data processing for AI models. The goal is to reduce how much memory these systems need.

On paper, this sounds like a big shift. Lower memory usage means lower hardware demand. And that is exactly what worried investors.

The fear was simple. If AI models become more efficient, they might need fewer memory chips. That could hurt companies that depend heavily on selling storage and memory products.

This is why the reaction in the market was so quick. Investors did not wait for deeper analysis. They reacted to the headline impact.

But when experts looked closer, the story started to change.

KC Rajkumar explained that this idea is not new. AI models have already gone through multiple stages of improvement. In earlier days, systems used 32 bit data. Over time, that moved to 4 bit models for inference.

So the shift to 3 bit is more of an evolution than a revolution.

He also challenged the way this update was being presented. Some reports claimed that TurboQuant delivers an 8x improvement. But according to him, that comparison is misleading. It compares new tech with very old systems, not with what is currently in use.

In reality, the improvement exists. But it is not as massive as the headlines suggest.

More importantly, Rajkumar highlighted a key factor that many investors ignored. AI demand itself is growing very fast. Models are becoming larger. They are handling more data. Token context lengths are increasing. All of this puts pressure on hardware systems.

This means companies will need smarter solutions. Compression is one of them. But it does not replace the need for memory. It only helps systems run more efficiently.

He clearly stated that such technologies reduce bottlenecks. They do not destroy demand.

Another major point is supply. The memory market is still facing constraints. Building advanced chips is not easy. It takes time and heavy investment. This keeps supply tight even when efficiency improves.

Because of this, the demand for DRAM and flash memory is expected to stay strong for at least the next 3 to 5 years.

Lynx Equity Strategies maintained its positive view on the sector. The firm kept a $700 price target on Micron and repeated its buy rating.

Rajkumar even called the current dip a buying opportunity. He believes the market overreacted to the news.

In simple terms, the panic was driven by fear, not fundamentals. Investors saw a new technology and assumed it would hurt demand instantly.