AI Chips Are Hiding the 'Stealth Bear Market'
Micron's earnings crash its website... Chips are driving the market while everything else is struggling... Meet the AI 'insiders'... The next stage for the AI megatrend...
It was a big night for tech earnings...
Yesterday after market close, memory-chip giant Micron Technology (MU) reported blowout fourth-quarter results. And, as with all AI-related companies, investors were clamoring for the release.
Micron's investor relations page saw such high traffic in the minutes after it released earnings that its website crashed.
Revenue and earnings both beat Wall Street's estimates, with sales more than quadrupling from the same period last year. And for the full 2026 fiscal year, revenue nearly quadrupled.
It wasn't just revenue that saw a huge jump... Micron's diluted earnings per share surged more than 1,000% year over year in the fourth quarter, and it grew 879% for the full fiscal year.
All four of Micron's segments more than tripled their revenue year over year. But its Core Data Center division – the one that most benefits from AI – was the real story. In the fourth quarter, data-center revenue hit $18 billion, up from just $1.6 billion in the same quarter last year.
So AI has Micron firing on all cylinders. And CEO Sanjay Mehrotra said that he expects "an even stronger fiscal 2027."
Even with the solid report, Micron shares fell as much as 3.5% today before roaring back to finish higher.
That early selling makes sense... Micron's shares had soared 273% this year as of yesterday's close, and more than 500% over the past 12 months. Lots of folks were ready to take profits.
But in the morning, just like yesterday, good news for tech stocks wasn't enough to overcome Treasury yields...
Both the 10-year Treasury and 30-year Treasury yields hit their highest levels since 2002 early in the morning and dragged stocks lower. Yields then fell off those highs into the afternoon, and all three major U.S. indexes finished higher.
What's good for chips is good for the S&P 500 Index...
As our colleague and Stansberry's Investment Advisory editor Whitney Tilson wrote in his free daily e-letter yesterday (and covered in his presentation during our Alliance Day), we're in a "stealth bear market."
From Whitney...
Consider this graphic posted on X by user Compound248 on Monday:
It shows that 59% of the stocks in the S&P 500 are in a bear market – down 20% or more. It also shows that 41% are down 30%-plus and 17% are down 50%-plus.
So even though the S&P 500 is less than 2% off its all-time high from August, nearly all individual stocks are doing worse... and most have slipped into bear market territory.
Now, since the benchmark index is weighted by market cap, the big tech companies shape its performance. But the S&P 500 Equal Weight Index, essentially an average of all 500 stocks, is down more than 6% from its own high.
Over the past month, the semiconductor industry has been the only thing keeping the market afloat. Over that period, the average S&P 500 stock is down about 5%, but the overall market is just about flat. And that's because the chip sector – as measured by the iShares Semiconductor Fund (SOXX) – is up more than 15%.
And for good reason. Hyperscaler data-center companies like Alphabet (GOOGL) and Meta Platforms (META) used to produce loads of free cash flow ("FCF")... raking in profits from their web businesses. Now, they're using that cash to build AI data centers – and much of that is flowing to chipmakers.
As research firm Hedgeye shared on X, hyperscaler FCF has gone negative, while FCF for semiconductor companies has surged to nearly $450 billion.
Once again, the market is getting extremely concentrated around the AI stocks. That's not what we want to see for a healthy, long-term bull market. But as long as the hyperscalers are spending (and chip companies keep reaping the rewards), AI will remain in the driver's seat.
Here are the AI 'insiders'...
On Tuesday, President Donald Trump hosted a luncheon with executives from many of the largest AI and technology companies.
At the event, Trump said that he and the executives had signed a "morally binding" agreement to commit to AI safety. And he added that the White House is considering building a 10-person committee to oversee AI companies.
The lunch was a "who's who" of the AI industry. It included executives from the AI firms Anthropic and OpenAI... hyperscalers like Alphabet, Meta, Amazon (AMZN), and Microsoft (MSFT)... and chipmakers like Nvidia (NVDA) and Advanced Micro Devices (AMD).
Financial commentator Gannon Breslin shared the seating chart from the event in a post on X...
If you're looking for which companies are going to be the big winners from AI, they were likely in this room.
As we've written before with respect to the "White House portfolio," the government has been putting its thumb on the scales and picking winners in the critical-materials sector.
Now, the same thing is starting to take shape in the AI industry...
While the government hasn't taken any stakes in these companies, their executives are now in Trump's AI inner circle. That gives them the inside track on shaping AI legislation... and maybe even a complimentary post from the president on his Truth Social account (like he has done with both Nvidia and Micron).
Many AI-related companies have gotten expensive as investors chase the market's trendiest sector. But with the possible power of the White House to back them up, we wouldn't bet against any of the companies in the president's "inner circle" – no matter how stretched their valuations get.
Brett Eversole also sees more upside in AI – at least for some companies...
In the past few weeks, we've highlighted several different warning signs popping up for the AI boom. Big IPOs have gotten postponed. Many AI players rely on "circular financing" deals... like Nvidia providing money to help AI companies buy its chips. And many firms are losing money on their AI investments.
Just this week, Reuters got a sneak peek at Anthropic's S-1 filing with the Securities and Exchange Commission. According to the news agency, Anthropic reported an $8 billion-plus operating loss on $4.6 billion in revenue. And it says Anthropic plans to invest more than $500 billion in computing and AI-infrastructure spending.
Those are big numbers. And they beg the question of whether Anthropic and the rest of the AI industry can keep this up.
But our colleague and True Wealth Systems editor Brett Eversole doesn't believe this is the end of the road for AI just yet. That's why Brett has gone live in an all-new, free presentation to explain what the next phase of AI will look like.
According to Brett, some of the biggest winners so far could be in real danger of collapsing – opening up the opportunity for a new wave of stocks to become the next AI darlings.
In his presentation, Brett shares his top AI stock, as well as the date that he believes could kick off the "AI Melt Up." Viewers will also hear one stock to stay away from, completely free.
True Wealth Systems subscribers and Stansberry Alliance members already have access to Brett's new research right here.
New 52-week highs (as of 9/30/26): Alpha Architect 1-3 Month Box Fund (BOXX), Hewlett Packard Enterprise (HPE), Okta (OKTA), Palo Alto Networks (PANW), Twist Bioscience (TWST), and Invesco DB U.S. Dollar Index Bullish Fund (UUP).
Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. We read every letter.
All the best,
Nick Koziol
Baltimore, Maryland
October 1, 2026