As Memory Stocks Stall, Wall Street’s AI Rally Broadens Beyond Semiconductors

AI server, optical networking and cybersecurity stocks dodge peak-out fears

Dell, Lumentum benefit from data-center expansion

Hacking threats surge as AI technology advances

Top three cybersecurity stocks up more than 150% in six months

Strength spreads to biotech, refiners and shipping

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U.S. stocks have climbed to record highs despite surging interest rates, inflation and other headwinds, with a shift in market leadership becoming increasingly apparent. Memory and central processing unit-related shares, which led the rally in the first half as investor money crowded into the sector, have struggled to regain momentum even after posting strong earnings. By contrast, Big Tech stocks are approaching 52-week highs, while AI infrastructure, cybersecurity and optical networking are drawing fresh attention.

◇Big Tech nears 52-week highs

On October 12, all of the Magnificent Seven stocks except Google parent Alphabet rose over the past three months in New York trading. Microsoft, which has repositioned itself as an AI platform company, surged about 40.5% during that period. Meta Platforms gained 11% on enthusiasm for its AI agents. Apple, long seen as trailing in the AI race, rose 8.1%, while Nvidia, the leader in graphics processing units, added 7.3%.

On Wall Street, the view is that Big Tech and several software companies including Palantir, Rubrik and Twilio have begun rallying again after strong gains through the second half of last year. Their shares moved sideways for more than a year as investors took profits, but have recently resumed a sharp climb. Nvidia, Meta, Apple and Microsoft have either neared, exceeded or renewed 52-week highs. Morgan Stanley recently included Alphabet, Amazon and Apple among its 15 top picks to lead the market over the next 12 months.

◇AI infrastructure and cybersecurity shares in focus

A notable change has also been the emergence of new AI rally leaders in AI servers and infrastructure, optical networking and cybersecurity. In the first half, semiconductor stocks such as Micron and SanDisk led the market, but the picture has shifted recently. Investors are paying attention because, unlike semiconductors, these industries are seen as less vulnerable to short- and medium-term peak-out fears. The Philadelphia Semiconductor Index, or SOX, rose above 14,600 in mid-June but had fallen to 12,236.79 as of October 12.

Among AI server and infrastructure names, Dell Technologies, NetApp and Hewlett Packard Enterprise have stood out. Dell Technologies has surged 351.30% this year as it shifts its core business from traditional PC manufacturing to AI infrastructure. Optical networking stocks such as Lumentum and Marvell have also jumped on expectations for expanding AI data centers. As the amount of data processed by AI data centers surges, optical networking is gaining traction as a new technology that could replace copper-based electrical connections.

Cybersecurity stocks are also in focus as hacking and other security threats rise with advances in AI. Shares of Palo Alto Networks, CrowdStrike and Fortinet, the three biggest U.S. cybersecurity companies, have each climbed more than 150% over the past six months. Kim Sung-hwan, an analyst at Shinhan Securities, said those sectors are likely to sustain growth through the year after next. Because they were not the core leaders of the earlier AI rally, they also avoided major damage during the speculative washout that emerged in the second half, he added.

Biotech, oil refining and shipping stocks are also gaining traction in the U.S. market. U.S. biotech companies including Moderna and Illumina have turned higher this year on momentum from new drugs and expectations for AI adoption. Refiners such as Valero and Marathon Petroleum have risen as refining margins jumped, while shipping stocks including Okeanis Eco Tankers have benefited from higher tanker rates.

Bae Sung-su, Korea Economic Daily reporter baebae@hankyung.com