The 19-year-old wunderkind beat Williams in the quarterfinals by a score of 3-6, 7-5, 6-4.
Stephens bounced back after the opening set loss. She had 23 winners and took five of eight break points available to her.
She will now face Victoria Azarenka in the semi-finals.
It would seem like too much to beat the world's No. 1 in Azarenka. After all, Stephens expended a lot of energy beating Williams.
But the next great American tennis player is up to the task. Not only does she have the talent, but she has the drive.
Advancing far in big tournaments is nothing new to her. She reached the fourth round of the 2012 French Open and the third round of Wimbledon.
Serena Williams is, rightfully, in awe of her. As she said, "She can be the greatest player."
Can Stephens Win it All?
That's quite the praise.
Yes, she's only 19, but she is currently ranked 25th in the world. She's no slouch.
She clearly has great talent and will ride the momentum from her stunning upset all the way to the final.
There are challenges ahead. She has to beat Azarenka and could end up playing Maria Sharapova in the finals.
Yet, we know what she's capable of. Beating Williams, who is coming off wins at Wimbledon, the U.S. Open and the 2012 London Olympics is incredible. 2012 was the year of Serena.
It's clear that 2013 won't be Serena's year. Already, shockingly, it's Sloane's world. We're all just living in it.
The world is just starting to learn about Stephens. By week's end, she'll be a household name when she lifts up the trophy as winner of the 2013 Australian Open.