By Jack Hough
Memory prices have been going "parabolic," a big investment bank wrote this past week. I gripped my TI-84 graphing calculator in outrage. My email inbox has turned into a parabo-looza, with misuse of that term up sixfold from last year. Ironic? Maybe. Parabolic? Not on my watch.
Parabolas are U-shaped, and not necessarily steep or upward opening. Show me a standard algebra function that opens with a tiny, negative number followed by an x squared, like y = -0.05x(2), and I'll turn it into a fat frown, not a heart-racing gain, and tell you we've just gone parabolic. And Wall Street had better not get me started on "exponential" -- my TI trigger finger is itchy.
But yes, memory prices are up a lot. D.A. Davidson this past week initiated coverage of Micron Technology with a Buy rating and price target of $1,000 a share. At a recent $540, that stock is already up close to 600% in a year. It's up 29% from just a few weeks ago, when I pointed out here that it had the lowest forward price/earnings ratio in the S&P 500. Now it's third-lowest, at 5.8 times earnings. Those earnings are expected to multiply 10 times over two years through August 2027 amid shortages and fierce demand from artificial-intelligence data centers.
The only thing more panic-inducing than buying the stock here might be not owning it. D.A. Davidson's bull case rests on two things. The first is what it calls node leadership, or Micron's skill in turning out new generations of popular memory types. The second is a much longer demand cycle than veteran chip investors might expect.
"In prior memory cycles, capacity arrived in lumpy increments, end demand followed the S-curve of product adoption, and when supply outpaced a largely predetermined demand envelope, margins compressed and the cycle turned," the firm's analysts write. "In today's cycle, compute deployment and demand generation exist in a positive feedback loop."
In other words, as hyperscaler data centers stuff in more Nvidia processors and Micron memory to feed them, bots that write software or develop drugs unlock new capabilities, creating additional demand. This doesn't mean that the cycle won't end, but that the ceiling is higher than at any point in history, the firm argues.
Convincing? Let's hope so, because it's more or less the bull case now for the broader stock market. This quarterly earnings season has been a Jim Dandy, pushing the full-year growth estimate for S&P 500 earnings from 15% back in February to 21% recently. That's largely to do with semiconductor companies, which have been predicting better earnings than the analysts who cover them, says Jonathan Golub, chief equity strategist at Seaport Research Partners.
"It's strange...why would the companies be more optimistic than the analysts?" says Golub. "In certain cases, if a company's saying, 'I'm going to grow 125%,' the analysts are like, 'That's just such an obscenely good number. I'll say 75.' And so, if you look at the estimates, they just keep going higher and higher."
Shares of Seagate Technology, the hard-drive maker, have gained 718% in a year, and analysts at Morgan Stanley, who call it a top pick, are scrambling to keep their expectations high enough. "For the third quarter in a row, our prior bull case is becoming our new base case," they wrote this past week. Hard drives capture about 80% of cloud storage, and are made by a disciplined oligopoly. Demand for them, writes Morgan Stanley, is riding "exponential" AI growth and getting support from a "parabolic" increase in flash memory prices. (I'm OK, thanks. It helps to breathe deeply while reciting the quadratic formula.)
Micron and Seagate both date to the late 1970s. Lately, the AI updraft is breathing new life into even more of old tech.
Back in a mid-March column on Nvidia, I noted that the graphics processing units that it sells have come to dominate sales of the central processing units that Intel is known for, but that the tide is turning back. While the parallel processing of GPUs is ideal for training AI models, the serial power of CPUs comes in handy for putting AI to work. Intel stock is up 117% just since then, and almost 400% over the past year.
Remember how in August the U.S. government bought a 10% Intel stake, largely by converting Chips Act funding? "I am responsible for making the United States of America over 30 Billion Dollars in the last 90 days on that stock alone," President Donald Trump posted on Truth Social this past week. Braggadocious, maybe -- but tastefully free of rocket ship emojis.
Intel, founded in 1968, has finally topped its dot-com bubble peak after 26 years. Wall Street hasn't wrapped itself in glory on this one. Just 7% of analysts who cover the stock said to buy it back when Trump took taxpayers long. Now 31% are bullish. Shares go for 84 times forward earnings on expectations of a peppy bounce back in earnings through the end of the decade.
Now for the oldest of our old tech. AI-focused computing doesn't replace the need for traditional servers. It increases it. Workaday rigs are needed for jobs like data loading and storage management. Dell Technologies and Hewlett Packard Enterprise are top players there, and while Dell is a relative puppy, dating only to 1984, HPE's roots go all the way back to 1939, when a pair of Stanford graduates were making audio oscillators in a one-car garage in what is now Silicon Valley. Walt Disney was an early customer for its 1940 movie Fantasia. By the way, forget about laptops or those $130 ink cartridges that your $150 smart printer is demanding like it's a hostage standoff -- that's a different company called HP Inc., which split off in 2015.
Dell is up 132% in a year, and trading at 16 times earnings, while HPE is up 78%, at 11 times. BofA Securities is bullish on both, and this past week raised its price targets to levels that suggest 17% more upside for Dell and 33% for HPE.
Write to Jack Hough at jack.hough@barrons.com. Subscribe to his Barron's Streetwise podcast.
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May 01, 2026 17:53 ET (21:53 GMT)
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