Memory stocks surge 35% as AI revenue growth fuels chip rally

Memory chip makers are re-rating as AI model revenue growth validates sustained infrastructure spending, pushing the semiconductor index back into bull-market territory after its shortest bear run since 2020.

Memory chip stocks surged Monday as AI model builders Anthropic and OpenAI posted accelerating revenue, pushing the Philadelphia Semiconductor Index back into a technical bull market after a 21-day bear run — the shortest since March 2020. Micron Technology rose 4.1 percent to seal a 17.5 percent five-day gain, its longest winning streak since January, while SanDisk climbed 8.9 percent and Western Digital and Seagate Technology added 5.4 percent and 2.2 percent, respectively.

"Bullish financial updates from frontier model builders Anthropic and OpenAI are the main near-term catalyst for chip stocks," Jordan Klein, trading-desk analyst at Mizuho, said in a client note. The two rivals are racing toward initial public offerings, and their financial disclosures are giving investors the visibility into AI demand that July's selloff had called into question.

Anthropic's second-quarter preliminary revenue reached $11.5 billion, up from $787 million a year earlier — a more than 14-fold jump — while OpenAI's annualized revenue run rate hit $40 billion, according to CFO Sarah Friar. Klein said buy-side consensus puts Anthropic's 2026 recurring revenue at $75 billion to $100 billion, with reports suggesting $180 billion to $200 billion by the end of next year. That translates into "a lot of" spending on AI chips, memory components, networking and other data-center hardware, he said.

The SOX closed up 1.6 percent at 12,621 on Monday, more than 20 percent above its July 29 low. Credo Technology Group was the best-performing stock since the index entered bear-market territory, up 59.4 percent in the period. The rally comes after the sector fell 30 to 40 percent in July, with the SOX plunging 21 percent that month — its worst since October 2008.

SanDisk's Investor Day Reshapes the Storage Valuation Framework

SanDisk's investor day last week provided a second pillar for the revaluation. The company set a 15 percent annual sales growth target and projected gross margins above 80 percent through the end of the decade, backed by new customer agreements and a revised supply strategy.

Bank of America analyst Vivek Arya said the event "suggests the industry may be entering a more durable phase" compared with its historical boom-and-bust cycles, offering "a framework for how investors may ultimately view memory stocks." J.P. Morgan rates SanDisk Overweight with a $2,250 price target, while Citi has a Buy rating and $2,100 target.

The pricing power extends across the supply chain. China's SMIC pushed wafer prices higher as utilization hit 93.7 percent, with second-quarter wafer shipments up 14 percent to 2.9 million. CoreWeave's backlog reached $104.2 billion, underscoring that capacity constraints — not demand — are the binding constraint.

Washington's Pushback on Chinese Memory Chips

The Trump administration has reportedly told Apple not to buy memory chips from Chinese manufacturers ChangXin Memory Technologies and Yangtze Memory Technologies, even as a supply crunch sends prices higher. Commerce Secretary Howard Lutnick told the Wall Street Journal that "the Trump administration is not in favor of that."

AvaTrade trading specialist Simon Friedman said Apple's turn to Chinese suppliers "was the one scenario that could have genuinely dented U.S. suppliers' pricing power over the next few years." The reported pushback "takes a serious long-term threat off the table for Micron, Sandisk and Western Digital," he said, and could extend to server makers including Dell Technologies and Hewlett Packard Enterprise.

The demand signals come as hyperscalers — Alphabet, Amazon, Meta and Microsoft — are projected to spend $740 billion combined on AI computing infrastructure in 2026 and $1 trillion in 2027. Alphabet reported negative free cash flow in the second quarter for the first time as a public company, and Amazon is projected to post negative free cash flow of $23.5 billion this year. Both have turned to debt markets, with Alphabet raising $85 billion in an equity offering in June and Intel raising $20 billion in an upsized share sale last week.

Still, Friedman cautioned against chasing the rally. "Stocks that move this violently in both directions tend to keep doing so, and today's rally, however well justified by the news, doesn't change that underlying volatility," he said. Analog Devices reports earnings Wednesday, offering the next gauge of whether AI demand is broadening beyond memory and compute into industrial and automotive chips.

This article is for informational purposes only and does not constitute investment advice.