The PHLX Semiconductor Index closed within striking distance of a new bull market on Wednesday after strong earnings from AI infrastructure names lifted chip stocks broadly. Some analysts warn the rally rests on spending commitments and order backlogs that have yet to be tested against real demand.
The PHLX Semiconductor Index finished at 12,399.38, edging closer to the 12,536.99 level needed to confirm a new bull market. A bull market is defined as a rise of 20% or more off a recent low. The move followed a broad rally across chipmakers and AI infrastructure suppliers.
Chipmakers lead the rally
Sandisk gained about 6% and Micron Technology rose about 5%. SK Hynix's American depositary receipts rose 9% on memory-chip demand. Nvidia and Advanced Micro Devices, both artificial-intelligence chip makers, climbed 3% and 2%, respectively.
The rally comes on the heels of Tuesday afternoon's earnings from CoreWeave, Super Micro Computer and Lumentum Holdings, all of which pointed to robust AI spending. CoreWeave's stock rose 19% on Wednesday, Super Micro's stock gained a similar amount, and Lumentum climbed more than 13%. Dan Kemp, founder of investment consultancy Portfolio Thinking, said these companies sit further down the AI supply chain and connect and install chips for use, giving investors a clearer view of actual demand.
Spending commitments raise questions
CoreWeave raised its capital-spending plans for the year to between $35 billion and $39 billion, up from $31 billion to $35 billion, even as its revenue outlook came in more modestly. The company also reported a net interest expense of $640 million for the quarter, against adjusted operating income of $128 million, according to Kemp. According to Kemp: "The caution is the scale of the commitments funding that demand."
Both CoreWeave and Super Micro also touted growing order backlogs, with Super Micro reiterating that new orders reached more than $60 billion in the June quarter. Kemp remains skeptical of those figures, however, since some orders could still be cancelled or delayed. He argued investors should treat a large backlog as a range of possible outcomes rather than as revenue already earned.
Fundamentals over momentum
Brian Mulberry, chief market strategist at Zacks Investment Management, said the earnings confirm that the AI trade is broadening rather than simply growing bigger. He noted that not all chip companies will benefit equally, so fundamentals will matter more than price momentum going forward. In his view, Nvidia, Broadcom and optical networking provider Coherent have the strongest fundamentals among the group.
Kemp framed the core question for long-term investors as whether demand is growing faster than current stock prices already assume. On that point, he said, the evidence remains far less comfortable.
Source: MarketWatch
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