Cybersecurity Rebound and AI Server Weekly Update — Micron and SMCI Valuation Check
Cybersecurity Rebound and AI Server Weekly Update — Micron and SMCI Valuation Check
Last week, cybersecurity stocks moved in unison. Zscaler and Palo Alto Networks climbed 4%. Fortinet rose 6%. Okta gained 7%. Only industry leader CrowdStrike lagged with a modest 1.6% advance. In the same week, Micron opened down 10%, rallied 14%, and closed essentially flat. SMCI rose 5.6% and now sits 19% above its March 20th low.
Three distinct stories compressed into a single week. Each carries a different lesson.
Cybersecurity — From AI Fear to AI Opportunity
A leaked paper about Anthropic's new AI model hit cybersecurity stocks first. The paper suggested the model could become a significant tool for hackers, and the market sold reflexively.
The reversal came fast.
What investors realized is what I have been saying since the selloff started in November: AI is not a threat to cybersecurity companies — it is a massive opportunity. Would any company entrust its most critical function — network and data security — to an AI model that hallucinates regularly? That is not a realistic scenario.
The data supports this. Among 100 large companies surveyed, 77% have deployed AI agents. Only 4% have secured them.
Four percent. The remaining 96% represents a security gap.
That gap translates directly into revenue for cybersecurity companies. Most cybersecurity stocks are down double digits from last year's highs — Zscaler alone has crashed over 50%. It was an AI panic selloff, and the market is now beginning to correct that overreaction.
I hold all five names — CrowdStrike, Zscaler, Palo Alto Networks, Fortinet, and Okta — and I am actively adding to the hardest-hit positions.
Micron (MU) — Down 22% Despite 300% Earnings Growth
It plunged 10% to start the week, then rallied 14% to close essentially flat.
The mid-March earnings report showed revenue up nearly 300% and EPS beating consensus by 33%. Yet the stock is still down 22% since that report. After a 700% run in the past year, expectations had simply gotten too high.
Alphabet's TurboQuant compression research added further pressure — claiming it could reduce the memory needed to run AI models by up to six times.
This pullback is a buying opportunity in my view. TurboQuant is research, not a product. Implementation takes time. Meanwhile, the reality for Micron looks like this:
- Revenue forecast: $108 billion (nearly tripling)
- EPS forecast: $58 (up 600%)
- P/S: under 4 times
- P/E: roughly 6 times
Both metrics sit well below historical valuation ratios. Memory chip production remains the single biggest bottleneck in the AI infrastructure buildout, and Micron has contracted its entire production capacity years in advance.
SMCI — Signs of Seller Exhaustion
Up 5.6% last week. Now 19% above the March 20th low.
Consider this: more than 500 million shares traded in just the five days following the crash. Everyone who wanted to sell appears to have done so. The upward pressure tells us that remaining holders are reluctant to sell unless prices move higher.
Management remains a problem. Poor governance, too few independent directors — that is acknowledged. But the business fundamentals have not changed.
SMCI builds the best AI-enabled servers in an industry that is among the biggest beneficiaries of $700 billion in AI spending this year.
| Metric | Value |
|---|---|
| Revenue growth this year | +88% |
| EPS forecast | $2.25 |
| P/S | 0.5x |
| P/E | Under 10x |
The valuation is cheaper than when the company was at risk of being delisted. Analysts have not downgraded revenue or earnings forecasts. There have been no signals from buyers or suppliers — particularly Nvidia — of reluctance to do business with the company.
This stock will reward patient investors.
FAQ
Q: Is the cybersecurity rebound a dead-cat bounce or a trend reversal? A: It appears to be the beginning of a correction to the panic selloff. The AI agent security gap (77% adoption vs 4% secured) will take years to fill, and that period is a sustained growth runway for cybersecurity companies.
Q: How significant is the TurboQuant risk for Micron? A: It is still at the research stage and will take considerable time to implement. Even if six-fold memory reduction is achievable, AI demand itself is growing exponentially, so absolute memory demand continues to rise. Micron's multi-year advance contracts support this view.
Q: How should investors weigh SMCI's governance risk? A: It is the biggest risk factor. However, a P/S of 0.5 and P/E under 10 already price in substantial risk. The key tells are that analyst forecasts remain intact and no major business partners have signaled withdrawal.
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