Key Takeaways:
Dip buyers returned to semiconductor stocks on Monday, betting the artificial-intelligence trade still has room to run after last week's rout.
Semiconductor stocks rebounded Monday as dip buyers emerged, with the VanEck Semiconductor ETF climbing 3.2% on speculation that the artificial-intelligence trade powering this year's bull market still has further upside.
"The AI theme continues to influence the broader market, and we're seeing stronger earnings drive stock upside," Lori Calvasina, head of US equity strategy at RBC Capital Markets, said.
The rebound followed a sharp sell-off last week that saw SMH drop 5.4% on Wednesday and another 4.5% on Thursday, as traders rotated out of AI-linked names. The iShares Semiconductor ETF closed Thursday at $566.32, just above its 50-day moving average of $566.02. Memory and AI-related stocks including Micron Technology Inc., Advanced Micro Devices Inc. and Broadcom Inc. led Monday's gains.
The rally tests whether the semiconductor sector's 82% surge in the first half of 2026 — its best ever — can resume after what some technicians see as a blow-off top. BTIG chief market technician Jonathan Krinsky warned that extreme volatility near highs "at best suggests a long period of consolidation, and at worst a more meaningful top."
The semiconductor sector's wild swings have drawn comparisons to past market peaks. RenMac head of technical research Jeff deGraaf noted that his firm's SOX bubble signal was triggered in late April, calling the chip complex "the only corner of the market in bubble territory." He compared the current pattern to the blow-off tops of 1995 and 2000 rather than the divergent rollover that marked the 2022 peak.
For investors, the question is whether the AI-driven demand for chips — from Nvidia Corp.'s H100 and Blackwell GPUs to custom silicon from Amazon.com Inc. and Alphabet Inc. — can sustain the earnings momentum that pushed the sector to record valuations. Nvidia shares, which have more than doubled over the past year, remain the bellwether for the trade. The company's data center revenue, which topped $47 billion in its most recent fiscal year, is expected to grow further as cloud providers continue expanding AI infrastructure.
The rotation out of semiconductors last week benefited other parts of the market. The S&P 500 healthcare sector gained 7% over the past month, outperforming the broader index's 4% advance. Krinsky said that while a full risk-off move remains premature, the low correlations across sectors suggest investors are hedging against a potential summer pullback.
This article is for informational purposes only and does not constitute investment advice.
