Soft Inflation Data and Micron’s AI Outlook Spark Market Rally
New York, Thursday, 18 December 2025.
Wall Street advanced Thursday on cooling inflation data, while Micron Technology fueled a tech rally by forecasting profits nearly double expectations, confirming insatiable demand for AI memory chips.
Inflation Data Arrives with an “Asterisk”
Following weeks of uncertainty regarding the “blind” post-shutdown reading—detailed in our previous coverage of the November Consumer Price Index (CPI) anticipation—the actual data arrived Thursday to a receptive market. Wall Street’s main indexes climbed significantly on December 18, 2025, as the inflation report came in softer than anticipated, keeping the door open for Federal Reserve interest rate cuts [1]. However, the data confirmed fears of a fragmented dataset; Art Hogan, chief market strategist at B. Riley Wealth, noted that while the lower-than-expected figures were positive, the report comes “with an asterisk” due to statistical adjustments necessitated by the lack of October data caused by the government shutdown [1]. Despite these data quality concerns, traders have priced in a 58% probability of a dovish policy move by the Fed in March 2026 [1]. This sentiment was further supported by labor market stability, as jobless claims fell last week, reversing a prior surge [1].
Micron’s “Blowout” Forecast Fuels Tech Optimism
While macroeconomic data provided the floor for the rally, Micron Technology (MU) provided the ceiling-shattering momentum. On Wednesday, December 17, the chipmaker released a fiscal second-quarter profit forecast that stunned analysts, predicting adjusted earnings of approximately $8.42 per share against Wall Street estimates of just $4.78 per share [4]. This represents a projection exceeding expectations by roughly 76.151%. Revenue guidance was equally robust, with Micron projecting $18.7 billion (plus or minus $400 million) for the current quarter, surpassing the analyst consensus of $14.2 billion by nearly 31.69% [4]. The company’s bullish outlook immediately eased broader concerns regarding valuation bubbles in the tech sector, driving the Nasdaq Composite up 1.88% by midday Thursday [1].
AI Demand Drives Capital Expenditure Surge
The driving force behind Micron’s aggressive guidance is the insatiable demand for high-bandwidth memory (HBM) chips required by artificial intelligence data centers [4]. Micron executives emphasized that supply remains tight, with Chief Business Officer Sumit Sadana stating that no customer is currently receiving 100% of their requested memory volume [4]. To meet this generational shift in demand, the company is scaling its infrastructure heavily; Micron has updated its 2026 capital expenditure plans to $20 billion, an increase from the previously estimated $18 billion [4]. This strategic pivot is already reshaping the company’s financials, with cloud memory sales doubling annually to reach $5.28 billion in the fiscal first quarter [3].
Analyst Sentiment and Market Impact
The combination of cooling inflation and semiconductor strength sparked a broad reassessment of tech valuations. By 11:27 a.m. ET on Thursday, the S&P 500 had gained 1.32% to reach 6,810.73, while the Dow Jones Industrial Average rose 0.89% [1]. Analysts responded swiftly to Micron’s update, with firms including Wedbush and Stifel Nicolaus raising their price targets to $300, up from $220 and $195 respectively [2]. This enthusiasm rippled through the sector, lifting the Philadelphia SE Semiconductor Index by 3% on Wednesday ahead of the general market rally [1]. While uncertainty over debt-backed AI spending persists [1], Micron’s ability to secure multiyear contracts with key customers suggests that the infrastructure phase of the AI boom is far from over [4].