Chip selloff proven wrong — Micron's blowout quarter signals AI trade is back
Thesis
The combination is telling: just two days ago, chip stocks were in freefall with the tech 'fear gauge' near a two-decade high and investors questioning whether the AI trade was over. Then Micron drops a blowout quarter showing revenue more than quadrupled and $100 billion in locked-in AI memory demand. This is the classic setup where extreme fear gets proven wrong by hard numbers — the selloff was overdone, and the earnings validate that AI infrastructure spending remains robust. When fear spikes to historic highs and then fundamentals surprise to the upside, the reversal can be sharp.
Strategy approach
Build a momentum strategy that enters long MU on D1 when the stock gaps up >10% on earnings and the prior 3 days saw a cumulative drawdown >5% in SOXX. Exit after 10 trading days or on a 8% trailing stop from the entry close.