A broad rally in semiconductor stocks sent the Nasdaq Composite and S&P 500 to new records Tuesday, as investors poured into companies essential to the artificial intelligence boom. The PHLX Semiconductor Index has now risen 54% over the last 25 days, its strongest run since the dot-com era.
"Companies that design, produce or sell the computer chips needed for intensive AI tasks, are currently the biggest beneficiaries of the massive AI infrastructure build-out," said Ohsung Kwon, chief equity strategist at Wells Fargo Securities. "That’s really where the bottleneck is."
The tech-heavy Nasdaq Composite rose 1% while the S&P 500 advanced 0.8%, with technology and materials stocks leading gains across all 11 sectors. Intel shares jumped 13% after reports that Apple is exploring using the company to build its main chips in the U.S. The move pushed Intel’s market capitalization above $540 billion. Elsewhere in the sector, Micron, Sandisk, and Qualcomm all added more than 10%.
The rally reflects a market increasingly focused on the monetization of AI technology. Investor enthusiasm was palpable in the options market, where traders flooded into semiconductor names. More than $2.8 billion of Micron options premium changed hands, with call volumes far outpacing puts as traders bet on a sustained move. The buying frenzy extended to related names like AMD, which has previously forecasted blockbuster demand for its own AI data center chips.
Investor optimism extended beyond the tech sector. The Dow Jones Industrial Average rose 0.7%, and the Russell 2000 index of small-cap stocks climbed 1.8% to a record.
In commodities, front-month Brent crude-oil futures fell 4% to $109.87 a barrel as geopolitical tensions in the Persian Gulf appeared to ease. The decline in oil prices helped temper inflation expectations, allowing the 10-year Treasury note yield to fall.
"It does not appear there has been a material escalation, and markets are breathing a sigh of relief,” said Bill Northey, senior investment director at U.S. Bank Asset Management Group. Still, some analysts caution the market may be overheating. Wells Fargo’s sentiment indicator recently triggered a “sell” signal for the first time since November 2021, suggesting investors should build in portfolio protection after what Kwon called a "sugar high."
This article is for informational purposes only and does not constitute investment advice.
