Memory stocks are losing their shine as investors reassess the sustainability of the artificial intelligence (AI) infrastructure boom, putting the Roundhill Memory ETF (BATS:DRAM) and iShares Semiconductor ETF (NASDAQ:SOXX) in focus ahead of Western Digital Corp. (NASDAQ:WDC) earnings.

Western Digital shares fell nearly 7% on Thursday, while Seagate Technology Holdings PLC (NASDAQ:STX) dropped more than 7%. DRAM and SOXX slid nearly 7%.

The selloff comes as investors weigh whether strong demand for AI-related storage and computing infrastructure can continue supporting elevated growth expectations. Western Digital is scheduled to report its fiscal first-quarter 2027 results after Thursday’s closing bell.

DRAM vs. SOXX: Two Ways to Track the Pullback

DRAM provides a more concentrated lens on the memory industry, while SOXX offers broader exposure to semiconductor companies. Comparing their performance, holdings and drawdowns can help investors assess whether the weakness is concentrated in memory-related stocks or reflects a wider retreat from AI hardware.

Western Digital shares have fallen 55% since hitting a peak in June, despite the S&P 500 gaining around 4.5% over the same period. Historical data cited by Trefis show that Western Digital declined an average of 34.8% across 15 market shocks since 2007, with a median recovery time of 8.7 months from the trough to its previous peak.

The key question is whether Western Digital’s earnings and guidance can reassure investors that improving fundamentals remain intact—or whether concerns about AI spending and slowing growth will continue weighing on memory and semiconductor ETFs.

Western Digital’s Fundamentals Tell a More Complicated Story

Despite the recent weakness, Western Digital’s operating performance has improved significantly. Revenue reached $12.9 billion over the 12 months ended July 3, 2026, up 35.7% year over year, while its operating margin climbed to 35.6% from 22.4% a year earlier.

The company has also strengthened its balance sheet. Debt fell to $1.05 billion at the end of fiscal 2026, compared with $7.43 billion two years earlier, leaving it with more cash than debt.

However, growth indicators warrant attention. Western Digital previously guided for a 55% to 56% adjusted gross margin in fiscal first-quarter 2027, only modestly above the 54.4% reported in the preceding quarter. Investors will be watching its latest results and outlook for signs that pricing power and profitability can withstand moderating shipment growth.

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