:max_bytes(150000):strip_icc()/GettyImages-2033326562-d9c54a30090346a8bd7aa56a0b3026f5.jpg "Chip Stocks Are Hot Today. AMD Is Just One Example.")
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Key Takeaways
- Wednesday has been a good day for chip stocks so far, with an index of semiconductor shares recently up more than 2%.
- One reason for the rise: sustained optimism about spending on the buildout of AI capabilities, even in the face of “bubble” worries.
Chip stocks are hot.
Semiconductor shares are rising Wednesday, lifted by Advanced Micro Devices (AMD) which, with a recent gain of about 8%, was among the S&P 500’s top gainers. The PHLX Semiconductor Index (SOX) of chip stocks was recently up 2.5%, looking strong even on an upbeat day for stocks broadly.
Sustained optimism regarding spending on the buildout of artificial intelligence capabilities is helping the sector. AMD yesterday announced a deal to sell chips to Oracle (ORCL), which followed another big partnership with ChatGPT owner OpenAI that landed earlier this month. An upbeat outlook from a chipmaking equipment leader hasn’t hurt; neither has a multibillion-dollar data center deal.
Why This Matters to Investors
The debate about how much longer the AI trade can stay hot isn’t going away—but neither, at least for now, are dramatic day-to-day moves in shares of some of the companies that have been among its biggest beneficiaries. Today in particular, that means chip stocks.
OpenAI news also lifted Broadcom (AVGO) earlier this week, with the companies announcing a deal Citi analysts estimated could be worth $100 billion in revenue; its shares were recently ahead 3.2%.
Shares of Nvidia (NVDA), the only company with a market capitalization above $4 trillion, were recently up 0.4%. It also got help from optimism that AI spending is poised to keep rolling: Analysts at HSBC on Wednesday lifted their “hold” rating to “buy,” setting a $320 price target on the shares that is about 78% above Tuesday’s close and the highest tracked by Visible Alpha, citing “better visibility” into the size of its addressable market in the coming years.
There’s undoubtedly concern about whether there’s a “bubble” in AI—and U.S.-China trade tensions don’t help, since the market for chips could be collateral damage in a trade war—but investors these days continue to pile in, looking for hot AI trades wherever they might be found.
AMD is today’s big beneficiary. Wall Street analysts’ latest reevaluations of the opportunity for the company after the OpenAI announcement “still do not reflect the revenue potential,” HSBC analysts wrote today.
