Investors shouldn’t shy away from two memory and storage stocks that have been huge recent winners, according to a Bernstein analyst.

In fact, Bernstein’s Mark Newman named Sandisk and Seagate Technology as his top sector picks for 2026. He sees the most upside for Sandisk in the short term, driven by “unprecedented” shortages of NAND memory that are leading to price increases.

Meanwhile, Seagate looks to be “a less volatile beneficiary of the data explosion,” according to Newman, who pointed to its leadership with its heat-assisted magnetic recording, or HAMR, technology.

His optimism comes in the wake of major gains seen by these stocks already. Sandisk’s stock is up about 1,000% since the company spun off from Western Digital 11 months ago. That includes a 63% rise just in the first two weeks of 2026. Seagate’s stock rose 219% over the course of 2025 and is up another 15% to start this year.

But as artificial-intelligence models continue to improve and get larger, Newman said larger training and inference workloads and a growing need for nearline storage will drive more demand for memory — a positive for Sandisk, Seagate and Western Digital. Nearline storage holds data that isn’t being actively used but that needs to be easily accessible.

“The data explosion necessary to enable and run AI models fuels an acceleration in memory and storage demand, creating an unprecedented memory [and] storage supercycle,” Newman said.

He pointed to intensifying training and inference workloads for AI models, improved content creation and the need for longer data retention as drivers of the data explosion. Newman said these trends are “creating insatiable (and price insensitive) demand for storage and memory,” resulting in “unprecedented price hikes.”

Newman noted Nvidia’s key-value cache memory system in its upcoming Vera Rubin AI platform as an example. A KV cache stores conversation history during large language model inference, or when the LLM is running, so that it doesn’t have to recompute. That basically serves as short-term memory. With the Rubin AI platform set to ramp, Newman sees “further fuel to the fire for NAND demand.”

Before Nvidia’s comments about Rubin’s KV cache, Newman said Sandisk was guiding to 17% supply growth for NAND, versus mid-20% demand growth. Now Newman said that undersupply is further amplified, which could support higher average sales prices in the future.

He said that most of Wall Street still sees capital spending from hyperscale cloud companies as a barometer of the AI trade’s health. However, he finds that to be a lagging indicator and suggests investors instead focus on whether AI models are showing consistent improvements.