Memory Sector Stocks Are Down 30% or More From Their Highs, But These 2 Are Worth Buying Now

A lot of the easy money in memory stocks has already been made in 2026, but the sector is not one monolith. Several names in this sector are trading down more than 20% below their highs, and I think two of them offer a better mix of upside and risk than the rest.

Memory names with big drawdowns

Western Digital (NASDAQ: WDC) has quietly become one of the more interesting "discounted AI storage" plays. After an enormous rally earlier in the year, the memory stock now sits roughly 35% to 40% below its recent intraday high of around $800, following a broad tech sell-off and profit-taking in cyclicals.

Fundamentally, the company's latest results do not look broken. In its fiscal 2026 third-quarter call, Western Digital reported revenue of $3.3 billion, up about 45% year over year, with earnings per share (EPS) nearly doubling. Management then guided Q4 revenue to $3.65 billion at the midpoint, with gross margin in the low 50s, suggesting that pricing and mix remain favorable across cloud, client, and consumer end markets. That is not the profile of a business in trouble; it is a business whose stock ran ahead of itself and is now digesting.

Then there is Silicon Motion Technology (NASDAQ: SIMO), a smaller but important player that supplies NAND flash controllers for SSDs, eMMC, and UFS storage. Its American depositary shares recently closed around $246, down roughly a quarter from a 52‑week high near 355, despite strong reported growth. In its Q1 2026 release, Silicon Motion posted net sales of $342.1 million, up 23% sequentially and 105% year over year, with embedded eMMC and UFS controller shipments up more than 30% quarter on quarter and 140% year on year.

Two other memory heavyweights that have been hit hard are SK Hynix (NASDAQ: SKHY) and Samsung Electronics. SK Hynix's shares plunged more than 15% in a single session in July, marking their biggest one-day decline on record, and are now over 20% below recent highs after its Nasdaq debut and a broader AI chip sell-off.

Samsung, the world's largest memory maker, reported explosive revenue and operating profit growth, but its stock still dropped around 10% from late-June levels and is more than 20% off recent peaks as investors reassess how sustainable current DRAM price hikes and margins are.

The two I would buy first

To me, Western Digital and Silicon Motion look like the best risk‑reward combination today. Western Digital is still cyclical, but its results and guidance suggest it is riding the same AI storage tailwinds as Micron Technology, with expanding margins and a clearer path to sustained profitability than in past cycles. The drawdown gives you exposure to high‑capacity drives and enterprise SSDs at a price that already accounts for a fair amount of bad news. The main risks are familiar ones: Storage pricing will eventually soften, and the company still carries debt from prior downturns. But you are at least getting paid to accept them at a discounted multiple and to improve fundamentals.

Silicon Motion, meanwhile, is leveraged to the controller side of the AI storage story. It is not selling raw DRAM or NAND; it is selling the brains that enable SSDs and embedded storage to communicate with host systems. Its launch of an AI‑optimized PCIe Gen5 DRAMless controller for PCs shows it is aiming directly at the next generation of client devices that need fast, efficient local storage for AI workloads. With revenue and margins moving the right way and the stock still well below its recent high, you are essentially paying a mid‑cap price for a company that sits in the critical path between rising NAND bit demand and the devices that use it.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Western Digital. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.