AI Stocks Got Some Good News—And Surged. Will This Micron-Powered Momentum Last?

AI stocks soared Thursday after memory chip maker Micron (MU) reported quarterly results far stronger-than-expected. That offered tech investors a glimmer of hope after weeks of disappointing performance for AI stocks. 

Micron was the S&P 500’s best-performing stock Thursday, with shares finishing up more than 10%. Fellow memory and storage companies Sandisk (SNDK) and Western Digital (WDC) saw similar jumps, rising 6% and 5%, respectively. Other AI beneficiaries, such as nuclear power provider Constellation Energy (CEG) and software company Applovin (APP), whose stocks have lately been pressured, were also sharply higher. 

Micron’s results were a big tailwind Thursday. The company blew past quarterly earnings estimates, citing booming demand from data centers for its memory chips and a supply shortage. Demand is so strong, according to executives on the company’s earnings call, that Micron is already sold out of high-bandwidth memory chips through 2026. 

“Yesterday’s guidance was everything [Micron] bulls could have hoped for,” said Ryan Lee, senior vice president of product and strategy at Direxion, in emailed comments. Micron predicted earnings per share of $8.19 in the current quarter, more than 70% above Wall Street’s expectations. The critical challenge for the company will be increasing supply without eating into margins, according to Lee. 

There were also notes of restraint. The semiconductor industry is notoriously cyclical, alternating between periods of severe undersupply and oversupply. “Investors should be valuing memory names on through-cycle profitability potential, not on current peak levels,” wrote Deutsche Bank analyst Melissa Weathers in a note on Thursday.

Still, Weathers hailed Micron’s results as evidence of “a paradigm shift in the memory sector.” The industry, she wrote, “is structurally low on supply, which could sustain for multiple years to come.”

The question on some investors’ minds Thursday is whether Micron’s results would be enough to revive the ailing AI rally. In early November, investors grew anxious about when big tech would see returns on its massive investments in artificial intelligence, if at all. Investors also grew wary of the industry’s increasing reliance on debt to fund its projects. Those concerns dampened the mood on Wall Street, causing high-flying tech stocks to pull back from their records.

Investors are increasingly demanding evidence that AI investments are delivering tangible benefits or will soon. Oracle (ORCL) tumbled last week after its results failed to temper anxiety about its debt-financed data center investments. Chipmaker Broadcom (AVGO) showed its AI business was booming, but investors focused on the impact that growth might have on its profit margins.

That’s likely why Micron’s results reinvigorated investors today. “Memory and storage vendors are demand weathervanes for AI, so seeing demand so vastly exceed supply is a positive sign for the industry as a whole,” Olivier Blanchard, research director and practice lead of intelligent devices at The Futurum Group, told Investopedia.

Paul Meeks, managing director and head of technology research at Freedom Capital Markets, believes the AI infrastructure boom has “at least another year, likely two” in it. That’s why he sees potential for Micron’s earnings to exceed already high expectations, and says “any dip presents an extraordinary opportunity” to buy the stock and other companies benefiting from AI spending.  

Morgan Stanley analysts said memory companies like Micron, Western Digital, and Seagate Technology (STX) “would be the biggest beneficiary” if tech companies and investors continue to plow money into AI infrastructure. “Memory and storage for AI are finally having their moment,” Blanchard said.