Microsoft's stock jumped 15.5% on Thursday, heading for its best day since 2008, after quarterly results showed accelerating cloud growth and eased concerns over its heavy AI spending. The move rippled through chip stocks, lifting battered names such as Lam Research, Micron and Sandisk higher.
Microsoft's earnings ease AI spending worries
Microsoft's stock rose 15.5% on Thursday, as investors warmed to the company's AI strategy after its latest earnings showed accelerating cloud performance. The company had been fending off criticism over its AI spending, particularly as cloud growth had been held in check. But management offered reassurance that heavy AI investment isn't expected to push Microsoft into negative free cash flow this fiscal year. Shares headed for their best day since 2008.
That reassurance extended to suppliers, too. Microsoft's commentary on its AI investments seemed like good news for the companies on the receiving end of that spending, even as its capital spending rose 70% in the latest quarter, inclusive of finance leases.
Battered chip stocks rebound
Chip stocks that had sold off in recent sessions rebounded across the sector. Lam Research shares popped 18% and headed for their best day since 1999 after posting strong earnings and guidance on AI-driven demand. Memory stocks jumped too: Micron and Sandisk rallied 18% and 26%, respectively, reversing losses tied to underwhelming results from South Korea's SK Hynix. Samsung warned the memory crunch could last into 2028, adding to the case for the rally.
The rally broadens across semiconductors
Other chip names joined the advance. The iShares Semiconductor ETF popped 8%. Applied Materials and AMD surged 15% and 13%, respectively, and Intel jumped 11%. Marvell Technology gained 13%, and Nvidia rose nearly 3%.
Arm Holdings also climbed 7% on strong demand for its first in-house chip, known as AGI CPU, as it looks to compete on physical silicon. Chief Executive Rene Haas said demand for the product has surpassed $2 billion across fiscal 2027 and 2028. Concerns that AI spending is nearing its peak had triggered a selloff that wiped out more than $1 trillion in market value earlier this week.
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