AI capital expenditure concerns ease, leading to a revaluation of storage stocks such as Micron and SanDisk, driving the chip index back into a bull market

The storage chip sector saw a strong rebound. Cutting-edge AI model companies Anthropic and OpenAI released impressive financial data one after another, boosting market confidence in the sustainability of AI hardware demand.

On Monday, Micron Technology shares rose 4.1%, accumulating a 17.5% gain over five consecutive trading days, marking the longest rally since January this year. Western Digital surged 8.9% in one day, while Western Digital and Seagate Technology gained 5.4% and 2.2% respectively.

The Philadelphia Semiconductor Index (SOX) closed up 1.6% at 12,621 points, rebounding more than 20% from its July 29 low, re-entering technical bull market territory. Its preceding bear market lasted only 21 days, the shortest since March 2020.

Previous media reports indicated that Anthropic's Q2 revenue soared to over $11.5 billion, a nearly 14-fold year-on-year increase. OpenAI's annualized revenue has reached $40 billion, confirming the ongoing expansion of AI demand.

Accelerated revenue growth for AI large models boosts chip demand visibility

One of the core drivers of the current rally is the continued impressive financial performance from leading AI model companies. In Q2, Anthropic's preliminary revenue exceeded $11.5 billion, compared to just $787 million in the same period last year.

Jordan Klein, analyst at Mizuho's trading division, noted in a client report, The "positive financial updates" from Anthropic and OpenAI are currently the most critical catalysts for chip stocks, and both companies are accelerating toward IPOs.

CNBC reported Friday that OpenAI CFO Sarah Friar told investors the enterprise business now accounts for a larger share of revenue than the consumer segment, with an annualized revenue run rate of $40 billion.

Klein stated that the market's consensus expectation for Anthropic's recurring revenue for the full year is between $75 billion and $100 billion, with reports suggesting this could rise to the $180 billion to $200 billion range by the end of next year. This will translate into "massive" procurement demand for AI chips, storage components, networking devices, and other data center hardware.

Although Anthropic currently faces chip supply constraints and a slower pace of enterprise technology adoption, Klein emphasized that the rapid uptick in revenue growth is the core signal investors are watching.

"You need to see favorable growth rates and financials that demonstrate meaningful acceleration and sustained momentum to maintain a bullish outlook for the semiconductor sector, and to attract investors who exited after July's sell-off back into the market."

SanDisk Investor Day reshapes valuation framework

Beyond the above-mentioned macro catalysts, the industry signals released during SanDisk's Investor Day last week also played an important role in this round of revaluation.

Bank of America analyst Vivek Arya stated in a client note, SanDisk’s Investor Day "suggests the industry may be entering a relatively more sustained phase," in contrast to prior, distinctly cyclical periods of boom and bust.

Arya pointed out that SanDisk's target of 15% annual sales growth and the outlook for gross margins remaining above 80% for the rest of the decade, supported by new customer agreements and supply strategies, provide a valuation reference framework for "how investors ultimately view storage stocks."

However, Friedman remains cautious about chasing the rally. He reminds that the sector's stocks fell 30% to 40% in July. "Stocks that swing this sharply in both directions tend to remain volatile. No matter how much news-driven support there is for today's rebound, it cannot change the inherently high volatility of the sector."