Semiconductor stocks are experiencing a significant surge in early trading following Micron Technology Inc.'s robust results, which highlight the rapid profit growth driven by artificial intelligence. The VanEck Semiconductor ETF saw a 5% increase in U.S. premarket trading, indicating strong investor confidence. This positive momentum also boosted shares of other memory and storage companies, with Western Digital Corp. jumping 12%, Sandisk Corp. climbing 12%, and Seagate Technology Holdings PLC adding 8.3%.
Micron, a crucial supplier for Nvidia's AI chipsets and the sole U.S.-based producer of high bandwidth memory (HBM) chips, announced a forecast for quarterly profit and revenue that significantly exceeded expectations. The company also disclosed that customers have committed $22 billion to secure memory chip supplies, emphasizing how AI-driven demand is tightening the market. This led to Micron's shares soaring over 17% in premarket trading on Thursday.
The strong performance from Micron and an optimistic outlook from Qualcomm have reinjected confidence into the AI trade, alleviating recent investor concerns that the valuations of AI-related companies had become overstretched. Earlier in the week, global tech shares, including U.S. chip stocks, had retreated from record highs due to reassessments of lofty AI-driven valuations. However, these new forecasts from key chipmakers have shifted market sentiment, with analysts at D.A. Davidson stating that Micron has entered a "new era" with unprecedented visibility and a memory cycle that is "far from over." J.P. Morgan analysts also noted that tight supply conditions are expected to persist, supporting a more durable earnings profile for the company.
Qualcomm further contributed to the sector's upbeat sentiment by announcing ambitious growth targets for its data center business, projecting $15 billion in annual revenue by 2029. This strategy aims to diversify beyond its traditional smartphone chip business and capitalize on the expanding AI ecosystem, further reinforcing the robust demand for AI-driven hardware and infrastructure. The overall positive outlook has led to more than $400 billion being added to the combined market value of chipmakers, according to Reuters, with the PHLX Semiconductor Index still up approximately 90% year-to-date even before the latest rally.
