Good morning investors,
Micron crossed $1 trillion yesterday. The stock ripped 19% higher in a single session, finally joining the exclusive club that seemed reserved for hyperscalers and consumer tech giants just a few years ago.
This is not a surprise to anyone who has been reading this newsletter as we have constantly talked about the AI trade not being dead when every commentator on TV was saying otherwise and hedge funds were dumping stock. The thesis was never complicated as every AI workload demands more bandwidth than current infrastructure can deliver, the companies manufacturing that bandwidth become indispensable.
Micron is up roughly 175% since I called the bottom in March. It has outpaced every Magnificent Seven name by a factor of four or more over that stretch. And at 8.6 times forward earnings, it remains cheaper than most consumer staples companies growing at a fraction of the rate.
Futures are green across the board this morning. S&P 500 futures are up 0.3%. Nasdaq futures have climbed 0.5%. Dow futures have added 227 points.
Oil continues to retreat on peace deal optimism. The 10-year yield is holding near 4.5%. The setup heading into today's Salesforce and Marvell earnings is constructive.
The Session
Yesterday delivered another pair of record closes. The S&P 500 gained 0.61% to a new all-time high. The Nasdaq jumped 1.19% to its own record. The Dow slipped slightly as industrial and financial names failed to keep pace with the technology surge.
We are now up over 17% in eight weeks. That kind of move has happened only ten times since 1990. In eight of those nine prior instances, stocks were higher twelve months later. The only exception was the dot-com collapse.
The tape is telling you something. It is telling you that this rally has legs despite what the skeptics keep insisting.
Why Memory Matters
Let me explain what is actually happening in the semiconductor supply chain, because I think most investors still do not fully grasp the dynamics.
Nvidia designs the GPUs that power AI workloads. TSMC manufactures those chips. But the GPUs themselves are only as fast as the memory feeding them data. High-bandwidth memory is the straw through which every AI model drinks. If the straw is too narrow, it does not matter how powerful the processor is.
Micron, SK Hynix, and Samsung are the only three companies on earth that can manufacture HBM at scale. There are no alternatives. There are no shortcuts. Building a new memory fab takes three to four years and costs tens of billions of dollars.
When Nvidia sells $91 billion worth of chips in a single quarter, that demand flows directly into orders for memory. The hyperscalers cannot deploy AI infrastructure without HBM. Every data center buildout, every sovereign AI initiative, every enterprise deployment requires memory that these three companies produce.
UBS raised their Micron target to $1,626 this week. That implies the stock can more than double from here. I think that estimate is reasonable if the demand trajectory holds, and nothing I see suggests it is slowing.
Taiwan Becomes Indispensable
Jensen Huang made an announcement yesterday that got less attention than it deserved.
Nvidia is now spending $100 billion annually in Taiwan and plans to increase that to $150 billion. The company is breaking ground this year on a new campus that will house 4,000 employees by 2030.
To put that in context, $150 billion exceeds what Nvidia generated in revenue last quarter. It would rank as one of the largest single-country capital commitments in corporate history.
"Taiwan is the epicenter of the AI revolution," Huang said in Taipei.
He is not being hyperbolic. TSMC manufactures essentially all of the world's most advanced semiconductors. Nvidia is about to become its largest customer, surpassing Apple. The supply chains that enable AI run through Taipei regardless of what happens geopolitically.
The investment also signals where Nvidia sees the opportunity. Not in China, where export restrictions have effectively locked the company out. Not in Europe, where permitting and energy costs make large-scale manufacturing impractical. In Taiwan and the United States, where the infrastructure exists to support this scale of buildout.
The Rotation Within Tech
Something important has shifted over the past two months.
From March 30 through yesterday's close, Micron gained 178%. The iShares South Korea ETF, heavily weighted toward memory names, gained 72%. Nvidia added 30%. Apple rose 25%. Tesla climbed 22%. Microsoft managed 16%. Meta gained just 14%.
The megacap AI trade has rotated from hyperscalers toward picks and shovels. The companies building the physical infrastructure are outperforming the companies buying it.
This aligns with the framework I laid out over the holiday weekend. The trade has evolved from "buy AI stocks" to "buy what AI is forcing the economy to build." Memory falls squarely in that category. So do networking, power infrastructure, cooling systems, and electrical equipment.
The rotation does not mean you abandon the hyperscalers. It means you recognize where the marginal dollar of alpha is being generated right now. And right now, it is being generated in the supply chain.
Software Gets Its Shot
Salesforce reports after the close today. This is the setup I have been watching.
The stock is down more than 50% from its 2024 highs. It was left for dead during the AI panic earlier this year when investors feared that large language models would commoditize traditional enterprise software. That thesis has not played out.
Options activity yesterday was heavily skewed toward calls. Implied volatility is pricing in a move of nearly 8%, roughly double what the stock has actually moved after recent earnings. Someone is betting big on a surprise.
I have been talking about a software catch-up trade for weeks. Microsoft, Salesforce, and the broader IGV complex all look like they are ready to participate after months of underperformance. If Salesforce delivers tonight, it could be the catalyst that confirms the rotation is broadening beyond semiconductors.
Marvell also reports today. The stock is up 120% year to date, riding the networking wave that has benefited from data center buildouts. I expect a strong quarter, but the bar is higher given how much the stock has already moved.
The Speculative Fever
I need to flag something that gives me pause.
Leveraged ETFs tracking SK Hynix and Samsung have attracted billions in inflows this year. The 2x SK Hynix product is now the largest single-stock leveraged ETF in the world with $8 billion in assets. That figure has tripled in three months.
South Korea's Kospi is up 100% in 2026. Retail investors across Asia are piling into levered chip bets at a pace I have never seen before.
This is not necessarily a sell signal. Speculative enthusiasm can persist far longer than skeptics expect, and it often accelerates into the final stages of a move rather than dissipating early. But it does mean the margin for error has compressed.
If you are sized appropriately, none of this should concern you. If you have been chasing the move with leverage or concentration that makes you uncomfortable, this is the moment to reassess.
The Structural Story Remains Intact
Let me step back and reiterate what I actually believe.
We are in the early to middle innings of a multi-year AI infrastructure cycle. The capital expenditure commitments are real and growing. The earnings revisions continue to surprise to the upside. The margin expansion in technology is widening the gap with the rest of the economy.
Micron at $1 trillion is not the top. It is the market finally recognizing what has been obvious in the order books for quarters. Memory is the binding constraint. The companies that control memory supply have pricing power that will persist until new capacity comes online years from now.
Taiwan is becoming more strategically important, not less. The capital flows are confirming it. Nvidia is putting $150 billion a year behind that conviction.
Software is getting its turn. The fears that AI would destroy enterprise software have faded. The companies integrating AI into their products are seeing adoption accelerate, not collapse.
The pain trade remains up. Sentiment surveys still show widespread skepticism despite all-time highs. Fund managers are carrying more cash than the tape would suggest. Every pullback gets bought aggressively.
That is not how tops are made. Tops are made when everyone is fully invested and no one can imagine stocks going down. We are nowhere near that condition. However, a pause at some point wouldn't surprise me, especially with the Strait of Hormuz / Iran war situation and mid term elections coming.
Final Thought
The market continues to reward those who stayed invested through the volatility.
Micron joining the trillion-dollar club is a milestone that would have seemed absurd eighteen months ago. Now it feels almost inevitable. That shift in perception is what bull markets do. They turn the unthinkable into the obvious.
Salesforce tonight could extend the rally into software. Marvell could confirm the networking thesis. Thursday brings Costco and Dell for another read on the consumer and enterprise spending.
Stay disciplined. Stay invested. The cycle has years to run.
Best regards,
Dan Sheehan
Subscribe: https://substack.com/@dansheehan3
Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.