Semiconductor Stocks Post 44% Gain as Big Tech Leadership Wavers

For the first time since 2022, the semiconductor industry is outpacing the Magnificent Seven in earnings growth, signaling a potential shift in market leadership.

The semiconductor sector is asserting its market dominance with the PHLX Semiconductor Index surging over 44% since March, while the earnings power of big tech's "Magnificent Seven" shows signs of faltering for the first time since 2022.

"The earnings leadership is instead expected to come from Micron Technology, Broadcom, and Sandisk,” said Fundstrat’s Hardika Singh, adding that the “switch-up of fortunes suggests the start of a new era in the stock market, backed by earnings growth for the little guys.”

Excluding Nvidia, the remaining six Magnificent Seven stocks are projected to see earnings growth of around 7.2% for the first quarter, underperforming the 10% gain expected for the broader S&P 500. This comes as the PHLX Semiconductor index crossed the 10,000-point threshold for the first time, capping an 18-day rally.

This divergence suggests investors are beginning to look beyond the mega-cap tech stocks that have led the market for years, rotating into the chipmakers that form the foundation of the AI boom. With the Magnificent Seven trading at a lofty 29 times forward earnings, compared to the 18.5 times multiple for the other 493 stocks in the S&P 500, the semiconductor sector's broad-based growth offers a compelling alternative.

A 44% Rally Built on Broad Demand

The semiconductor rally is not just a story about one or two high-flyers. ASML Holding, the Dutch company that makes key manufacturing equipment, has seen its stock climb 36% in 2026 on soaring demand. The company's first-quarter revenue jumped 13% year-over-year, and it raised its full-year growth forecast to 16%. "Semiconductors have done much of the heavy lifting this quarter, and there’s clearly powerful momentum behind the group," said Bret Kenwell, U.S. investment analyst at eToro.

The demand is coming from all corners of the tech world. Memory chipmakers SK Hynix and Samsung Electronics recently placed orders for ASML's advanced machines worth billions, while logic chip customers like Taiwan Semiconductor Manufacturing are also boosting their capital expenditure. Wall Street strategists project hyperscaler infrastructure spending to reach $650 billion this year, a massive tailwind for the entire chip ecosystem.

Magnificent Seven's Armor Shows Cracks

In contrast, the market's reliance on a few tech giants is being tested. While the Magnificent Seven index has gained around 15% in April, its year-to-date performance is less than 1%, lagging the Nasdaq's 15% and the S&P 500's 6.9% advance.

"Absent a material worsening in energy supply conditions, technology can reassert leadership over energy, but conviction will depend on earnings delivery, the credibility of AI spending plans, and stable macro expectations,” said Bob Savage, head of markets macro strategy at Bank of New York Mellon. The upcoming earnings reports from Microsoft, Apple, Amazon, Google, and Meta will be a critical test of whether their massive AI capital expenditures are translating into returns.

While Nvidia continues to command attention with its $5 trillion market cap, the real story for investors may be the broadening of the AI trade. Companies like ASML, which holds a virtual monopoly on key manufacturing equipment, are seeing soaring demand, with its stock already up 36% in 2026. For investors, the rotation from a handful of mega-cap leaders to the wider semiconductor ecosystem suggests a new phase of the bull market, where the makers of the picks and shovels are finally getting their due.

This article is for informational purposes only and does not constitute investment advice.