America’s stock market is surging, but it’s still all about AI
By John Towfighi, CNN
(CNN) — AI companies’ plans for blockbuster initial public offerings (IPOs) are captivating Wall Street.
Anthropic on Monday took a major step toward going public. Rival OpenAI is also expected to file for an IPO. Elon Musk’s SpaceX, which filed for an IPO in May, is slated to start trading on the stock market this month.
As companies race to dominate in AI, Wall Street expects the enormous buildout of data centers to continue in order to power the technology. That’s sparking fierce rallies in companies other than just Big Tech: Some of the hottest stocks this year have been the memory chip makers and data storage companies poised to benefit from the AI infrastructure buildout.
Big Tech’s enormous spending on AI infrastructure, and plans for IPOs like Anthropic’s, are creating tailwinds for companies involved in the supply chain.
It’s boosting shares in companies like SanDisk (SNDK), which is up more than 600% year-to-date. SanDisk specializes in memory storage.
Micron Technology (MU), Seagate Technology (STX) and Western Digital (WDC) have all soared more than 200% this year. Micron makes memory chips. Seagate and Western Digital specialize in data storage.
The S&P 500, in comparison, is up 11% so far this year.
Alphabet (GOOG) on Monday announced its intent to raise $80 billion in equity, with $10 billion from Berkshire Hathaway (BRK.B), to fund the buildout of AI infrastructure. The plan underscores the tailwinds for companies in the supply chain for data centers.
Memory mania
AI systems require enormous memory and storage to function efficiently and process large swaths of data.
Demand for chips and memory is so intense that it’s outstripping supply, exacerbating concerns about shortages. That imbalance is allowing chip makers and storage companies to charge more for their products, boosting their earnings and growth forecasts, said Angelo Zino, tech analyst at CFRA Research.
“Certain pockets of the supply chain are seeing some significant bottlenecks,” Zino said. “Those areas of the market that are seeing the greatest bottlenecks also have the greatest potential upside to pricing.”
It’s enticing investors on Wall Street as well as retail traders. Micron was the second-most traded stock, after Nvidia (NVDA), on trading platform Interactive Brokers in the five trading sessions leading up to May 26. SanDisk was sixth.
Roundhill, a financial services company, launched an exchange-traded fund in April focused on memory stocks, with the ticker DRAM, a reference to a type of memory technology. The DRAM ETF rose 61% in May.
Analysts expect the AI buildout to transform revenue streams for companies like SanDisk and Micron. SanDisk shares, leading the pack, are up more than 4,500% across the past 12 months. SanDisk spun off from Western Digital in February 2025.
Analysts at Citi on May 19 raised their price target for SanDisk from $1,300 to $2,025. The stock closed at $1,761 on Monday, up 27% since Citi upgraded its target two weeks ago.
SanDisk has “capitalized on the current state of the market” by laying out business deals with clear pricing agreements and “financial guarantees loaded with prepayments,” Tom O’Malley, an equity analyst at Barclays, wrote in a May 26 note.
Historic rallies
Micron was worth just over $100 billion one year ago. The memory chip company surpassed $1 trillion in market value last week, making it worth more than JPMorgan Chase. Micron shares are up nearly 1,000% across the past 12 months.
Micron’s market value doubled from $500 billion to $1 trillion in less than 50 trading days, a record feat. Nvidia, in comparison, took nearly 500 trading days to double from $500 billion to $1 trillion.
Analysts at UBS on May 26 raised their price target for Micron from $535 to $1,625. The upgrade sparked a fierce rally, with Micron shares surging 19% for their best day since 2008. Long-term business agreements, because of the data center buildout, should bolster Micron’s earnings, the analysts noted.
Meanwhile, Seagate and Western Digital continue to benefit from data storage demand. O’Malley at Barclays raised his price target for Western Digital from $450 to $620. The stock is trading at just below $550 and is up more than 950% across the past 12 months.
It’s not just the US experiencing a memory boom because of AI: In South Korea, chipmaker SK Hynix just surpassed $1 trillion in market value. Samsung Electronics achieved the feat earlier in May. Both companies are holdings in Roundhill’s DRAM ETF.
Zino at CFRA Research said stellar earnings have justified the soaring rally. Valuations, or measures of how expensive stocks are, are still relatively cheap, said Rob Thummel, portfolio manager at Tortoise Capital.
SanDisk “has had a great run, but there’s going to just be tremendous demand for the memory product to further support the development of AI applications,” Thummel said.
The-CNN-Wire
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