Micron and other chip stocks spring back to life after bruising selloff

By Britney Nguyen

It's a key week for tech stocks as Nvidia gears up for a European conference and Meta prepares to report earnings

Micron's stock rose Monday.

After a painful selloff spanning nearly two weeks, the chip sector is on the mend.

Nvidia's stock (NVDA) closed up 1.4% Monday, while rival Advanced Micro Devices' stock (AMD) finished up about 1.7%. Shares of Micron Technology (MU) and Intel (INTC), which have both been major beneficiaries of artificial-intelligence demand so far this year, climbed about 3% and 2.4%, respectively. Sandisk's stock (SNDK) also rebounded Monday, finishing up 5.5%. The iShares Semiconductor ETF SOXX was up 1.7%.

And shares of neocloud company Nebius Group (NBIS), which delivers cloud services focused on AI workloads, bounced 2.9% higher.

The chip sector slid across the previous eight sessions as investors questioned the sustainability of AI spending growth. Investors took issue with reports of financial progress at privately held AI companies OpenAI and Anthropic.

Those concerns were further fueled by broader economic trends, including inflation rising faster than anticipated in September, which could lead the Federal Reserve to raise interest rates with more urgency. Higher interest rates would weigh on companies like CoreWeave (CRWV) that are borrowing large amounts of money to fund the data-center build-out.

The chip sector comeback Monday reflects confidence in AI spending and the potential for companies to monetize their AI offerings, Brian Mulberry, chief market strategist at Zacks Investment Management, told MarketWatch.

As third-quarter earnings kick off, Mulberry said investors will be looking across other sectors to confirm that demand remains strong and that adoption of the technology is growing.

If chip sector momentum sustains throughout the day on Monday, that could "clear out the tone and build back positive momentum" from the past few months - "especially in semiconductors," he said.

The selloff shows "the honeymoon might be over for the AI trade," Luke Rahbari, CEO of Equity Armor Investments, told MarketWatch, as investors "are starting to ask questions and not blindly accepting valuations."

From there, investors are looking for the strongest players in terms of market position and innovation, he said. And as valuations come down, there's more opportunity for investors to get back into stocks such as Nvidia and AMD that have more compelling AI cases, Rahbari said.

He pointed to the latter's recent acquisition of World Labs, which he said will give the company "a leg up on what AI is going to look like."

Going forward, Rahbari said investors will continue to be nervous about the amount of debt building up in the AI market.

Against this more jittery backdrop, Nvidia's conference in Berlin as well as third-quarter earnings results from Meta Platforms (META) this week "are going to be crucial when it comes to restoring confidence that the AI build-out will deliver on the promises that it has made," said Richard Windsor, founder of research firm Radio Free Mobile.

He also noted "mounting delays" in AI data-center rollouts, as Americans push back against construction in their communities. Operators are also running into issues with permitting and electricity shortages. Microsoft (MSFT) reportedly said Monday that it will no longer pursue a deal for computing power from a data center run by neocloud Nscale Global Holdings (NSCL) in the U.K. due to challenges with power supply, according to the Wall Street Journal.

Despite the fears over new data centers, however, Windsor said in a note to clients that he sees "a silver lining" for companies that are already operating data centers.

"The price that a [data-center] operator can currently charge for capacity is currently at supernormal levels," he said, adding that a five-year return can range from 45% to 85% annually.

While that growth will eventually normalize as more computing power comes online, "this is increasingly looking like it will take longer than expected" given the delays, Windsor said, therefore "creating a substantial benefit to those who have capacity available for sale now."

That would be a boon for cloud service providers, he said, and in his view, xAI and Meta will be the main beneficiaries, as he thinks those companies have the most incremental capacity available to sell to customers.

Overall, Windsor said "very little has changed" as far as the underlying drivers of the AI trade, "as all of the companies that have reported in the last month are still sold out at least 12 months in advance." That sets next year up well, he said, although he expects short-term pricing for data centers to start to return to normal levels.

-Britney Nguyen

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(END) Dow Jones Newswires

10-19-26 1706ET