Micron Technology blew past Wall Street’s expectations for its May quarter, projecting revenue and profit that also topped analyst forecasts. The memory maker’s shares surged 14% in after-hours trading, lifting Nasdaq futures and providing a sharp counterpunch to a dayslong selloff in technology stocks.
The blockbuster earnings arrived after a slump in tech shares that rippled from South Korean chip makers to American fiber-optic cable providers. As investors increasingly searched for bottlenecks in the globe-spanning supply chain for AI, gauging whether profits would meet the hype, Micron’s report suggested that a worldwide scramble for memory chips shows no sign of slowing down.
Analysts said the trillion-dollar company’s results could be enough to rejuvenate a stock-market rally that has fueled wealthier Americans’ spending — and concentrated risk in a handful of companies big enough to spark market swings across continents. This week, as investors fled South Korean tech companies SK Hynix and Samsung, Micron shares slid 7.5%, while Nvidia skidded 5.5% and Oracle slumped 15%.
“Are these market selloffs normal? I’d argue yes,” said Ron Albahary, chief investment officer of multifamily office LNW. “We’re seeing a lot more of these significant up and down days. That’s just a sign of a market that is highly dependent on a particular narrative.”
That concentration, coupled with a changing economic backdrop, has added to the volatility. As the race to build data centers and improve AI models has reached historic proportions, Silicon Valley hyperscalers and other developers have increasingly turned to capital markets for help, tethering their outlooks to a Federal Reserve that now appears more hawkish toward inflation than many on Wall Street expected.
“That puts more risk in the AI stocks themselves,” Albahary said.
On Wednesday, an intensifying oil selloff toward prices last seen before the Iran war helped fuel a Treasury rally, dragging down bond yields. The resulting fall in borrowing costs that follows such moves could give tech stocks more room to run, analysts said.
Historically a boom-bust business, memory is the latest beneficiary of the AI boom as hyperscalers spend to secure what has long been a simple commodity. Soaring revenue and profits for memory and storage companies have sent shares of some up anywhere from 900% to 4,000% over the past 12 months, according to the report. And they are still cheap — trading below 10 times projected earnings over the next 12 months — because investors are skeptical that the good times will keep rolling.
The hyperscalers’ spending is powering earnings across the semiconductor supply chain. But an open question remains: will consumers and companies ultimately pay up for the AI technology that is being built, justifying capital expenditures that will ultimately be measured in the trillions of dollars?
Micron is trying to allay those fears by striking long-term agreements with customers to lock in today’s high prices for its products. It touted four such agreements with “very large customers,” and executives said they expected a supply crunch for memory extending beyond 2027.
AI jitters have swept across markets in recent days, leaving some investors pointing to technical indicators that conjure memories of the speculative fervor leading up to the dot-com bust. An index tracking U.S. semiconductor companies recently traded more than 60% above its 200-day moving average, according to Dow Jones Market Data, hitting its highest such levels since 2000.
Individual investors have increasingly piled into leveraged exchange-traded funds, aiming to amplify the moves in semiconductor stocks and at times exacerbating tremors rippling through markets. After the chip stocks’ run-up in recent weeks, traders on Monday funneled a record $437 million into an ETF designed to triple traders’ bearish bets on a second semiconductor index, according to FactSet. Stocks plunged the next day.
The recent gyrations have crystallized a new reality in a market where fortunes can rise or fall with just a handful of trillion-dollar companies: volatility is back.
“The investment boom is likely to extend, and near-term expectations of its scope may still need to rise,” Goldman Sachs told clients recently. “But with a lot of value already built in, markets are more vulnerable to news that challenges an optimistic view.”