According to Reuters on May 13, the Philadelphia Semiconductor Index (SOX) surged 64% since late March. In comparison, the S&P 500 index rose about 17% during the same period. Notably, Micron and AMD saw their shares jump by 138% and 129%, respectively, while Intel's stock skyrocketed nearly 193%.
Reuters noted that large capital expenditures for AI infrastructure have boosted semiconductor demand, resulting in an investment frenzy that has spread beyond Nvidia, which initially led the charge.
Steve Edwards, a senior investment strategist at Morgan Stanley Wealth Management, described the situation as a "perfect combination," stating, "There is a solid fundamental story, and the technical momentum is quite strong." He added, "These two factors have created a very enthusiastic and optimistic investor base, driving momentum forward."
However, even optimistic investors in semiconductor stocks are preparing for a potential cooling of the rally. Reuters reported that the recent surge in semiconductor stocks is being compared to the dot-com bubble of 1999-2000.
Peter Tuz, president of Chase Investment Counsel, remarked, "Whenever you see something rising parabolically, you have to ask yourself, 'Is the mood getting too euphoric?'" He indicated that he has sold some Qualcomm shares in response.
Technical indicators are also flashing warning signs. On May 8, the SOX's weekly Relative Strength Index (RSI) reached 85.5. The RSI is a technical indicator that shows overbought or oversold levels of an asset, and this figure marks the highest overbought level since the peak of the dot-com bubble in March 2000.
Investor Michael Burry, known for his role in the film "The Big Short," has maintained his put option bets on the iShares Semiconductor ETF (SOXX). Put options give the holder the right to sell an asset at a predetermined price, typically used to bet on price declines.
The overheating of semiconductor stocks is also seen as a burden on the broader U.S. stock market. Currently, semiconductor and semiconductor equipment stocks account for 18% of the S&P 500 index.
According to institutional brokerage Johnstreead, 70% of the $5.1 trillion increase in market capitalization for the S&P 500 this year has come from gains in semiconductor and memory stocks.
Michael O'Rourke, chief market strategist at Johnstreead, warned, "Now that they occupy such a large share of the S&P 500, any correction or disappointment could pose risks to the broader market."
Continued Optimism
Despite these concerns, optimism about the semiconductor sector remains strong. Market research firm Gartner forecasts that global semiconductor revenue will increase by 64% this year, reaching $1.3 trillion. Earnings for semiconductor and semiconductor equipment companies within the S&P 500 are also expected to rise by about 95%, significantly exceeding the initial forecast of 62% growth at the beginning of the year.
King Lip, chief strategist at Baker Avenue Wealth Management, stated, "There is demand for AI infrastructure and computing and networking, which represents a multi-year capital expenditure cycle, and we see this as a very interesting trend for semiconductors."
Ayako Yoshinaka, senior investment strategist at Wells Enhancement, added, "Considering the fundamentals driving many of these companies, I believe there is still room for growth."
* This article has been translated by AI.
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