U.S. stock markets closed an impressive second-quarter 2026. The S&P 500 and the Nasdaq Composite rallied 14.9% and 21.4% respectively, to post their best second-quarter performance since 2020. The Dow advanced 12.9%, marking its strongest quarter since the fourth quarter of 2022.

Momentum Likely to Continue in Q3

AI trade is gathering steam as days progress. AI infrastructure trade is now expanding from chips to memory and storage devices as well as servers and racks. Moreover, agentic AI is expanding the scope of AI infrastructure providers in the physical layer.

Massive AI data center growth is benefiting several nuclear power generator and reactor makers, construction giants, cooling and water purifying companies and industrial manufacturers. 

On May 28, the U.S. government entered into a "memorandum of understanding" with Iran to extend the ceasefire for 60 days and continue negotiations on the latter’s nuclear program. The negotiations include the reopening of the Strait of Hormuz with Iran removing its mines within 30 days and the United States gradually lifting the naval blockade. 

At this stage, we recommend five stocks with a favorable Zacks Rank that are expected to maintain their momentum in the third quarter, too. These are: Micron Technology Inc. (MU Quick QuoteMU - Free Report) , Western Digital Corp. (WDC Quick QuoteWDC - Free Report) , Microchip Technology Inc. (MCHP Quick QuoteMCHP - Free Report) , Credo Technology Group Holding Ltd. (CRDO Quick QuoteCRDO - Free Report) and Sterling Infrastructure Inc. (STRL Quick QuoteSTRL - Free Report) . 

Each of the stocks sports a Zacks Rank #1 (Strong Buy) at present and has a Zacks Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

Image Source: Zacks Investment Research

Micron Technology Inc.

Micron has been benefiting tremendously from the enormous application of AI in day-to-day life, which has pushed up the demand for memory chips. The four major hyperscalers raised their AI capital expenditure budget to $750 billion for 2026. This figure is set to cross $1 trillion next year and is likely to rise further beyond 2027. 

This has resulted in more AI semiconductor sales implying the need for multiple AI memory chips to operate. Flash memory technologies like DRAM and NAND are used in AI chips, enabling them to perform optimally. 

This has pushed up the demand for AI-enabled memory chips. In their last earnings reports, all four major hyperscalers highlighted a shortage of memory and storage chips, resulting in soaring prices of these products. As a result, MU benefits significantly. 

Micron has meaningful exposure to AI, cloud data centers, industrial IoT and autonomous vehicles, all of which require increasingly advanced memory solutions. As AI adoption accelerates, demand for DRAM and NAND products continues to rise. 

MU has invested heavily in next-generation memory technologies, positioning itself to meet the growing performance and efficiency requirements of AI systems. A particularly important growth driver is high-bandwidth memory (“HBM”), which has become essential for advanced AI workloads. Micron Technology’s HBM3E and HBM4 products are seeing exceptionally strong demand because they offer the speed and efficiency required by modern AI systems.

MU’s position in the AI ecosystem continues to strengthen. NVIDIA identified Micron as a key HBM supplier for its GeForce RTX 50 Blackwell GPUs, reinforcing its importance within the AI supply chain. Demand for HBM4 is also benefiting from next-generation AI infrastructure deployments, including NVIDIA’s Vera Rubin platform. 

Micron has an expected revenue and earnings growth rate of more than 100% each, for the current year (ending August 2026). The Zacks Consensus Estimate for the current year’s earnings has improved 16.3% in the last seven days.

Western Digital Corp.

Western Digital has been witnessing strong execution amid intensified cloud and AI demand. WDC saw strong data center demand and increased adoption of high-capacity hard disk drives. This reflects its ability to scale reliable, high-capacity storage solutions to meet the needs of the AI-driven data economy.

As AI and cloud adoption accelerate, demand for higher-density storage continues to rise. WDC is meeting this demand through close collaboration with hyperscalers, delivering reliable, high-capacity drives at scale with strong performance and total cost of ownership.

Western Digital has an expected revenue and earnings growth rate of 38.1% and 82.3%, respectively, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 6.6% over the last 30 days.

Microchip Technology Inc.

Microchip Technology benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. MCHP’s new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure. 

These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance. The success of the restructuring plan also bodes well for MCHP’s prospects. The company also entered the PCIe retimer market in the June 2026 quarter as a companion device for Gen6 switches, and disclosed an OEM design win that displaced a competitor. 

MCHP has expanded connectivity, storage and compute offerings for AI and data center applications, as well as intelligent power modules for AI at the edge. These factors are expected to drive top-line growth in the long term.

Microchip Technology has an expected revenue and earnings growth rate of 31.7% and 88.4%, respectively, for the current year (ending March 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.3% in the last 30 days.

Credo Technology Group Holding Ltd.

Credo Technology is a provider of high-performance serial connectivity solutions for the hyperscale datacenter, 5G carrier, enterprise networking, artificial intelligence and high-performance computing markets.

CRDO’s outlook is supported by widening AEC adoption, rising hyperscaler and Neo cloud traction, and a larger optical portfolio that now includes silicon photonics PIC technology following the DustPhotonics acquisition. AECs remain the primary growth engine as they play an increasingly critical role in AI-driven networking deployments.

ZF Optics is moving from initial ramp to a broader fiscal 2027 revenue contributor. The acquisition of Dust Photonics strengthens CRDO’s high-speed optical connectivity portfolio with silicon photonics PIC technology. 

The deal adds advanced technology, including 800G and 1.6T solutions, and would aid in developing upcoming 3.2T solutions. CRDO projects more than $600 million in optical revenues, with ZeroFlap optics, silicon photonics PICs and optical DSPs each contributing more than $100 million in fiscal 2027.

Credo Technology has an expected revenue and earnings growth rate of 75.8% and 72.8%, respectively, for the current year (ending March 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 17.5% in the last 30 days.

Sterling Infrastructure Inc.

Zacks Rank #1 Sterling Infrastructure specializes in constructing complex data centers, e-commerce distribution facilities, and manufacturing sites. The company is a major provider of high-density, AI-Powered data centers. STRL is a notable beneficiary of the massive AI data center boom.

E-Infrastructure Solutions projects develop advanced, large-scale site development systems and services for data centers, e-commerce distribution centers, warehousing, transportation, energy and more. 

Sterling’s combined offering of site development and electrical services is gaining traction faster than expected. STRL highlighted that in the first quarter of 2026, two data center campuses moved to integrated execution six to eight months earlier than planned, validating cross-sell traction and schedule compression benefits. 

STRL’s complementary investments — AI tools that increased project manager capacity by about 15% and a modular manufacturing program that will triple capacity within nearly 18 months — reduce field labor intensity and enhance quality/efficiency.

Sterling Infrastructure has an expected revenue and earnings growth rate of 59.2% and 75.7%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.1% over the last 30 days.