The Hottest Thing in the Stock Market Is Suddenly Boring Tech
The Micron Technology Inc. headquarters in Boise, Idaho, US.
(Bloomberg) — After years of soaring on hopes for a high-tech artificial-intelligence future, the stock market’s latest hot corner is an old fashioned part of the technology industry.
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Seagate Technology Holdings Plc, which makes hard disk drives for computers, is the best performing stock in the S&P 500 Index this year after soaring 156%. Rival Western Digital Corp. ranks third with a 137% gain. And Micron Technology Inc., the biggest maker of memory chips in the US, is fifth following a record 12-session winning streak pushed its 2025 rise to 93%.
For bulls, the wild rally in a bunch of typically quiet companies that were founded before Mark Zuckerberg and Sam Altman were even born, demonstrates how unrelenting demand for AI computing gear is benefiting a broad range of businesses. To bears, however, it’s the latest sign that the stock market has been swallowed by a bubble that’s destined to pop.
“This is the type of behavior that you see in a bubble period,” said Michael O’Rourke, chief market strategist at Jonestrading, who was a trader during the dot-com era. “When people start looking for those secondary and tertiary trades because the leadership group has gotten so expensive, that to me says you’re in a very late stage in the cycle.”
Nearly three years after the debut of ChatGPT sparked a craze for all things AI, investments in infrastructure to support the technology continue to pour in. Big Tech companies including Microsoft Corp. and Alphabet Inc. are spending tens of billions of dollars a year on things like semiconductors, networking equipment and electricity to power data centers used to train large language models and run AI workloads.
This spending has fueled the rise of chipmakers like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co., whose market values are now in the trillions of dollars, and captured the attention of investors around the world.
But Seagate and Western Digital are among the least sexy companies swept up in the AI euphoria. Hard disk drives trace their origins to the 1950s, when they stored five megabytes of data and weighed more than 2,000 pounds. Today, personal computers have hard drives with up to two terabytes of storage and that weigh around 1.5 pounds or less. And the companies that make them are focused on developing storage solutions that have become critical in training large language models, which requires massive amounts of data.
It’s the same with memory chips. Micron, whose high-bandwidth DRAM memory is an integral part of AI computing, also inspires little excitement from the average investor.
“I can hear people’s eyes glaze over when I talk about them on the phone,” said Kim Forrest, founder of Bokeh Capital Partners. “They want to talk about flying cars and dog robots.”
AI Over-Hype
Forrest, a former software engineer who has managed money for two decades, owns Micron because of its competitive advantages in the memory market. But more broadly she believes AI is currently over-hyped and, like the internet, the technology’s use cases will take much longer to evolve than most people expect, she said.
“If you’re buying things that are specifically for AI or for data centers, anything that is on that straight-line trajectory is a cautionary tale waiting to happen,” Forrest said.
The AI craze has also boosted interest in other sleepy areas of the stock market.
Electricity producer Vistra Corp. is up 53% this year after soaring 258% in 2024 and 66% in 2023. And chipmaker Broadcom Inc. now has a market value of $1.6 trillion after climbing 49% this year and roughly 100% in both 2024 and 2023. And digital storage and memory maker Sandisk Corp. has had a wild ride this month, soaring more than 100% since Sept. 2.
Meanwhile, Oracle Corp., a legacy software maker best known for its slow-growing database business, is now the 10th-most-valuable company in the S&P 500 thanks to demand for cloud-computing services. The stock’s 36% jump the day after its earnings report on Sept. 9 sent the company’s valuation to the highest since the dot-com era and sparked further bubble debate.
Seagate, Western Digital and Micron, on the other hand, are usually among the cheapest stocks in the S&P 500 owing to their cyclical nature and relatively small following in the investment community. All three are profitable now, but each has lost money on an annual GAAP basis within the last three years.
At the beginning of 2025, Western Digital was priced at less than six times estimated profits while Seagate and Micron traded around 10 times. Although their valuations have jumped since then, all three stocks trade at a discount to the S&P 500, which is priced at 23 times profits projected over the next 12 months.
Seagate, the most expensive of the three with a valuation of 20 times estimated profits, is still very attractive considering how strong the outlook for demand is for its products, says Benchmark Co. analyst Mark Miller. He raised his price target on the stock to a Wall Street high $250 last week, implying upside of more than 13% to the stock’s $221 closing price on Friday.
“We see higher Seagate HDD prices and margins which argue for the expansion from historic multiples,” Miller wrote in a research note last week.
Seagate’s revenue is projected to rise 16% in fiscal 2026, which ends in June, down from 39% in fiscal 2025, according to data compiled by Bloomberg. Western Digital, which is on the same reporting calendar as Seagate, is projected to see revenue rise 16% in its current fiscal year after sales fell 27% in fiscal 2025. Micron has the strongest sales outlook of the three, with revenue expected to climb 48% this year and 33% next.
Wall Street is bullish on Seagate, Western Digital and Micron, but the stocks have risen so fast that analysts haven’t been able to boost their price targets quickly enough. Seagate is trading more than 20% above the average projection, and Western Digital is more than 10% over its average 12-month price target. Micron is slightly above its estimate.
To some Wall Street pros, these are all signals that it may be time for investors to take their profits in these stocks.
“Historically with any cyclical business, usually they peak at a low multiple and they trough when they have negative earnings,” Jonestrading’s O’Rourke said. “So the time to buy it is when the cycle has reversed and they’re losing money, and the time to sell it is when the multiple looks healthy.”
