Oracle flops, Micron pops

The AI trade may be glitching for some tech names, but Micron just hit “upgrade.”

Micron blew past fiscal Q1 expectations, topping revenue and earnings estimates. The data storage manufacturer also issued guidance far higher than anticipated: its net-income guidance came in 75% above consensus. Shares jumped 10.16% today.

The impressive quarter was driven by demand-supply imbalance. AI-related demand for memory is so strong that Micron expects to meet only half to two-thirds of some customer orders, pushing gross margins to 68%. Suppliers that were punished by the last downturn in the dynamic random-access memory market a few years ago are deliberately keeping output tight, pushing prices high. With supply expected to stay constrained, Cantor Fitzgerald’s CJ Muse doesn’t see balance returning until 2027.

Micron is also lifting capital spending to $20 billion, up from $18 billion, though still below Muse’s estimate of $22 billion to $23 billion.

Cut to Oracle

AI stocks aren’t all sharing Micron’s momentum. The group has been dragged down by Oracle’s worsening debt picture and investor fatigue around expensive AI buildouts.

Just yesterday, Blue Owl Capital walked away from a planned $10 billion, 1-gigawatt data center project for OpenAI in Michigan, citing concerns about Oracle’s rising leverage and aggressive AI spending.

The problem is that Oracle is pouring money into infrastructure before the product, echoing the 19th-century railroad boom where tracks were laid before trains ran on them. Oracle signed $248 billion in new lease commitments that begin in fiscal Q3 and run up to 19 years, a 148% jump since August.

But even that number understates the true weight of the company’s liabilities. Oracle is also relying on leases, special purpose vehicles, and vendor financing to support its AI infrastructure push. “While those other forms of financing help reduce immediate cash needs and free cash flow burn, liabilities will climb much faster than the capex numbers imply,” analysts told Bloomberg.

Oracle fell 5% yesterday, and is now down roughly 50% from its September peak as investor sentiment sours.

On the brighter side…

Oracle’s weakness has spilled into the rest of the AI trade—but despite investor jitters, Micron is emerging as one of the sector’s strongest names, and analysts are leaning in.

JPMorgan lifted its price target and Bank of America upgraded the stock to Buy after results arrived this morning. Morgan Stanley even called Micron’s quarter one of the strongest revenue and profit beats in the “history of the US semis industry,” second only to Nvidia.

​​If Micron's momentum holds, its strength could help stabilize a tech rally that’s been rattled by Oracle’s debt-driven selloff, giving AI-exposed stocks a potential path to recover lost ground.—SY