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Why Seagate Stock Topped the S&P 500 Index Today

Motley Fool - Thu Mar 21, 5:31PM CDT

Thursday was a fine day to load up on computer chip and storage stocks. In the latter category, data storage mainstay Seagate Technology(NASDAQ: STX) had a bullish trading session, closing more than 1% higher against the S&P 500 index's 0.3% upward crawl. Seagate largely has one of its tech sector peers to thank for that.

The Micron effect

That peer is flash memory maker Micron Technology, which unveiled its latest set of quarterly results before market open. Happily for that company's shareholders and the elements of the tech sector affected by the memory market -- like Seagate's stock in trade, storage -- the results were impressive. Micron posted a heavy double-digit rise in revenue, while its non-GAAP (adjusted) operating profit flipped into the black.

All things being equal, if the various chip segments in the tech sphere are doing well, storage also stands to gain. Robust demand for chips tends to indicate a hunger for more sophisticated products, and more sophisticated products tend to raise the need for larger-capacity and better storage solutions.

It almost goes without saying at this point that much of the momentum behind such companies is due to the insatiable demand for artificial intelligence (AI) solutions. These require vastly more computing power, hence the need for cutting-edge processing hardware.

A rosy, AI-powered future

AI is only going to get more sophisticated in the coming months and years, and quickly. That should keep chip demand sustainably high, and storage solutions businesses like Seagate are poised to continue benefiting from the knock-on effect.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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