AI boom drives gains for chip stocks

Investors are gripped by fear of chip stocks disappearing.

The Philadelphia Semiconductor Index, an index tracking the world’s 30 largest semiconductor makers, rose this week to its highest level in 14 months on the back of stellar earnings from Nvidia.

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Gains have sent the index up 38 percent so far this year, far outpacing the tech-heavy Nasdaq Composite. The latter, which includes Apple and Google parent Alphabet, grew by a quarter over the same period.

Nvidia has led the charge because of its dominance in supplying chips capable of handling the enormous computing power that can quickly create human-like text, images and content.

The US conglomerate’s market capitalization rose more than $184bn to nearly $1tn this week after forecasting $11bn worth of sales over the next three months, about $4bn ahead of consensus expectations. “This is the largest increase we’ve seen in our coverage,” said analysts at Bank of America.

But companies such as AMD, Marvell Technology, and Applied Materials have also soared 95 percent, 70 percent, and 40 percent, respectively, this year.

“Nvidia is the clear leader, but two-thirds of (Philadelphia Semiconductor Index) constituents are outperforming the S&P 500 year-to-date and more than a third are tripling the rate of the S&P 500,” Bespoke Investing Noted Analysts Group in New York.

Demand from institutional investors appears to be dampening chip makers’ recent rally. They are the “primary source” of demand for AI stocks, according to Vendatrack, with only a “modest increase” in interest from retail investors.

The data provider said that despite the hype, “the latest AI trend is still relatively small compared to the meme stock bubble of 2021”.

Still, AI is on the top of many executives’ minds. A record 110 of the S&P 500 companies cited the word “AI” during their earnings calls for the first quarter, according to FactSet.

“The rally in AI-related companies in particular has raised concerns that the segment is now in a bubble,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. At the same time, “we don’t see the AI-related rally being volatile”.

Investors are gripped by fear of chip stocks disappearing.

The Philadelphia Semiconductor Index, an index tracking the world’s 30 largest semiconductor makers, rose this week to its highest level in 14 months on the back of stellar earnings from Nvidia.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Gains have sent the index up 38 percent so far this year, far outpacing the tech-heavy Nasdaq Composite. The latter, which includes Apple and Google parent Alphabet, grew by a quarter over the same period.

Nvidia has led the charge because of its dominance in supplying chips capable of handling the enormous computing power that can quickly create human-like text, images and content.

The US conglomerate’s market capitalization rose more than $184bn to nearly $1tn this week after forecasting $11bn worth of sales over the next three months, about $4bn ahead of consensus expectations. “This is the largest increase we’ve seen in our coverage,” said analysts at Bank of America.

But companies such as AMD, Marvell Technology, and Applied Materials have also soared 95 percent, 70 percent, and 40 percent, respectively, this year.

“Nvidia is the clear leader, but two-thirds of (Philadelphia Semiconductor Index) constituents are outperforming the S&P 500 year-to-date and more than a third are tripling the rate of the S&P 500,” Bespoke Investing Noted Analysts Group in New York.

Demand from institutional investors appears to be dampening chip makers’ recent rally. They are the “primary source” of demand for AI stocks, according to Vendatrack, with only a “modest increase” in interest from retail investors.

The data provider said that despite the hype, “the latest AI trend is still relatively small compared to the meme stock bubble of 2021”.

Still, AI is on the top of many executives’ minds. A record 110 of the S&P 500 companies cited the word “AI” during their earnings calls for the first quarter, according to FactSet.

“The rally in AI-related companies in particular has raised concerns that the segment is now in a bubble,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. At the same time, “we don’t see the AI-related rally being volatile”.