Growth Funds Beat Indexes on AI Storage Plays

Micron Technology contributed 1.9 percentage points to the cumulative return of the Morningstar US Market Index from early 2025 to September 2026. This contribution occurred while the stock was technically excluded from major growth benchmarks. Index providers classified Micron as a value holding during this period. The misclassification persisted for 36 months. During this time, the stock was absent from the Russell 1000 Growth Index.

Artificial intelligence demand reshaped the earnings profiles of hardware suppliers. Memory and storage companies saw rapid revenue growth. This growth outpaced the quarterly or annual reconstitution cycles of standard indices. As a result, style labels in major indexes lagged behind market reality. Investors who relied solely on index membership missed significant upside in these sectors.

Index Lag Creates Investment Gaps

Fund managers often restrict holdings to their benchmark to avoid overlap. This strategy limits exposure to stocks that do not fit the current index profile. Micron was removed from the Russell 1000 Growth Index in June 2023. It remained in the value index until June 2026. When it rejoined the growth index, it became the seventh-largest position. Active management allowed some funds to hold the stock during its exclusion.

Intel experienced a similar style shift. It moved from a deep-value classification in 2024 to high growth. It contributed an additional 0.6 percentage points to market returns. The stock remains outside the Russell 1000 Growth Index despite its performance. This disconnect demonstrates the speed of AI-driven repricing. Traditional style boxes fail to capture these rapid transitions.

Early Buyers Outperform Passive Peers

A review of 21 large-growth funds from four firms reveals distinct strategies. From January 2023 to December 2024, half of these funds held Micron or Western Digital. The other half waited for index inclusion. Fidelity Blue Chip Growth bought these stocks more than two years before the index change. This early positioning captured the initial phase of the AI buildout trade.

Some managers purchased Micron in May 2026. This occurred one month before the stock rejoined the growth index. Three T. Rowe Price funds bought the stock in the same month as index trackers. These late entries missed the bulk of the pre-reconstitution gains. The timing of purchases determined the relative performance against the benchmark.

Fidelity Funds Show Distinct Patterns

Fidelity displayed a higher propensity for early adoption. Eight of its nine large-growth funds held Micron or Western Digital. In contrast, only three of the 12 funds from MFS, JPMorgan, and T. Rowe Price held these names. This disparity suggests a structural difference in portfolio construction. Active score metrics highlight these deviations from benchmark characteristics.

GN auto markets/indices data confirms the divergence in holdings. The ability to hold value-labeled stocks within a growth mandate requires flexibility. This flexibility allowed specific managers to capture AI-driven earnings growth. Passive strategies remained locked out until formal reconstitution. The result was a measurable performance gap between active and passive approaches in this sector.