Chip Stocks Gain Momentum as Earnings Impress, Approaching Bull Market Levels
On August 12, US semiconductor shares extended their rally driven by better-than-expected earnings from key AI infrastructure companies. SanDisk and Micron Technology rose about 6% and 5% respectively, while storage chip heavyweight SK Hynix’s American Depositary Receipts surged 9%. AI chipmakers NVIDIA and AMD also advanced 3% and 2%. The PHLX Semiconductor Index (SOX) closed at 12,399.38 points, nearing the 12,536.99 threshold required to officially enter a new bull market. Per Dow Jones Market Data, a 20% rise from a recent low confirms such a market shift.
Diverging Views on the Scale and Sustainability of AI-Driven Capital Spending
A key driver of the recent chip stock rebound has been strong quarterly results from core AI ecosystem firms such as CoreWeave, Super Micro Computer, and Lumentum Holdings, signaling ongoing robust capital expenditure in AI-related areas. Dan Kemp, founder of Portfolio Thinking, emphasizes that these companies are downstream players deploying chips, providing data closely tied to actual chip demand, which underpins investor optimism.
However, Kemp raises concerns over the reasonableness of the scale of capital outlays. For example, CoreWeave raised its projected annual capital expenditure from $31 billion to a range between $35 billion and $39 billion, despite relatively modest revenue growth expectations. The company reported interest expenses of $640 million in the quarter against adjusted operating income of just $128 million. Kemp notes a lack of corresponding confirmation from consumer and enterprise spending levels to justify such large investments.
Moreover, while CoreWeave and Super Micro have reported continued backlog growth—with Super Micro’s new orders exceeding $60 billion—Kemp cautions investors against taking backlog figures at face value, warning of risks from possible order cancellations or delays, signaling such backlogs are not guaranteed revenue.
Stable Consumer Price Index Supports Market Confidence
On the same day, the release of US Consumer Price Index (CPI) data broadly aligned with market expectations, lending steadiness to market sentiment. Shares of CoreWeave and Super Micro each climbed 19%, while Lumentum, a supplier of data center optical components, gained over 13%.
Analyst Perspectives Stress the Need for Clear Fundamental Drivers
Brian Mulberry, Chief Market Strategist at Zacks Investment Management, highlights that corporate earnings confirm expanding AI-related demand, not just growth in scale. CoreWeave’s strong GPU demand and Lumentum’s indication of increased optical network infrastructure needs exemplify this trend.
Nonetheless, Mulberry underscores that benefits are not distributed evenly across chipmakers; fundamental performance will be critical for investment decisions. Companies exhibiting accelerated growth, such as NVIDIA, Broadcom, and optical communication equipment provider Coherent, are favored based on fundamentals rather than momentum alone.
Kemp similarly advises long-term investors to scrutinize whether demand truly surpasses market expectations, noting current supporting evidence remains limited. Though the semiconductor sector shows signs of recovery, caution remains warranted regarding the durability and scale of demand.