Computer memory chip maker Micron Technologies has delivered a substantial boost to market sentiment, particularly for investors in artificial intelligence (AI), following its impressive quarterly results. Micron, a key manufacturer of memory chips essential for computing, reported earnings for the quarter ending May 31, which surged an extraordinary 1400 per cent year-on-year to US$28.2 billion, significantly outstripping analyst forecasts. The positive outlook extended to its current quarter’s revenue forecast of US$50 billion, well above Wall Street’s expectations. Micron’s shares, already up significantly, jumped 16 per cent in after-hours trading, adding an estimated US$192 billion to its market capitalisation. The company also projects memory demand will exceed supply until at least the end of 2027.
Despite the AI-driven optimism, broader market concerns about persistent inflation and potential interest rate hikes continue to loom. US Treasury Secretary Scott Bessent suggested the Federal Reserve might need to raise rates further, a sentiment that immediately impacted private capital markets. Leading private capital firms on Wall Street experienced significant sell-offs, with Apollo Global Management dropping 6.1 per cent, Blackstone 5.9 per cent, Blue Owl shedding 4.9 per cent, and Carlyle Group declining by 4 per cent. These declines reflect growing unease among wealthy retail investors, who have significantly exited private credit vehicles. The latest data from Apollo’s US$15 billion Debt Solutions fund shows redemption requests equal to 17 per cent of its value in the second quarter, leading to capped withdrawals; broader analysis indicates retail investor attempts to pull US$15 billion recently.
While private credit executives in Australia assert loan performance remains robust, Macquarie chief executive Shemara Wikramanayake previously warned that liquidity issues from persistent redemptions could evolve into credit problems. Risks are emerging, particularly in middle-market direct lending, driven by weaker credit quality, rising borrower stress, and significant exposure to AI sector debt, including massive data centre financing deals. In response, hedge fund manager Lee Robinson has launched a new fund, Altana, to short life insurers heavily invested in private credit, betting on a revaluation of their exposure to potential sector issues. Seasoned industry veterans like JPMorgan chief executive Jamie Dimon continue to highlight that private credit has yet to face a severe stress test, with upcoming asset valuations expected to provide further clarity.
