How much longer can the good times last? Three memory chip companies have quietly contributed a quarter of the S&P’s gains this year.

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The strong performance of memory chip stocks this year is becoming a key force supporting the rise of the S&P 500 index. However, as the momentum for upward revisions to earnings expectations gradually diminishes, this driving force is also beginning to face a test.

According to Bloomberg strategist Simon White's calculations, over the past six months, Micron contributed about 1.4 percentage points to the S&P 500's cumulative 8.3% gain, accounting for nearly one sixth; if SanDisk and Western Digital are combined, the three memory chip companies together contributed nearly a quarter of the index's returns.

This means that much of the S&P 500's gains this year have focused on a handful of memory chip stocks. As analysts have less room to continue raising earnings expectations, whether these companies' stock prices can maintain their strong performance will increasingly depend on the delivery of actual results, rather than valuation expansion.

From Expectation-Driven to Performance Verification: Memory Chip Market Logic Switches

In early April this year, the position of the memory chip sector in the market underwent a dramatic change. Previously, Nvidia, Apple, and Alphabet had long dominated the list of contributors to the S&P 500's returns, while memory chip companies had almost negligible impact on the index.

This pattern reversed in April. Upward revisions to memory chip earnings expectations not only catalyzed the sector’s rally, but also prompted the market to reprioritize the beneficiaries in the AI industrial chain. After distinguishing the value of cloud vendors and hardware companies, capital tilted further toward memory chips, causing them to outperform computing chips for a period.

However, the core logic behind the sharp rise in memory chip stocks—the continuous upward revision of earnings expectations—is gradually losing momentum. Bloomberg data shows that the analyst upgrade/downgrade ratio for S&P 500 constituents’ earnings forecasts for the next year has fallen back to the balance point of 1, and the speed of upgrades for the next two and three years is also slowing.

This means that the expectation premium supporting the expansion of memory chip valuations is gradually dissipating. To maintain current valuations and their outsized contribution to the index, these companies will need to deliver actual results that meet market expectations, rather than relying on further earnings upgrades. At the same time, the higher the market expectations, the greater the pressure for stock price corrections if results fall short.

Memory Chips Alone Can't Hold the Line? S&P 500 Faces Earnings Test in the Second Half

The strong performance of memory chips reflects a deeper internal structural rotation within the main AI investment theme. After nearly two years of semiconductor sector leadership, the market is becoming increasingly divided on who the ultimate winner is in the AI value chain.

Bloomberg analysis points out that the software sector has recently begun to show relative strength. If technical patterns, share buyback intensity, and relative momentum indicators continue to improve, capital is likely to further flow into the software field. Meanwhile, memory chip stocks have seen a periodic pullback recently. Although this hasn't weakened their massive contribution to the index's gains this year, it reminds the market that the current index structure, which relies heavily on a few stocks, is inherently fragile.

Looking to the second half of the year, the S&P 500’s performance will largely depend on whether memory chip companies can continue to support current valuations with sustained earnings. If results fail to meet expectations, this year's most important driving force may become a major source of volatility.

Risk Disclaimer and Exemption ClauseThe market has risks, investment requires caution. This article does not constitute personal investment advice and does not take into account the individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Responsibility for any investment made based on this article rests solely with the user. ```