Chip stocks led Monday's market gains after reports that the Trump administration is pushing back on Apple's plan to source memory chips from Chinese suppliers, a move one trading strategist said takes a long-term threat off the table for U.S. chipmakers. Anthropic's revenue growth and OpenAI's expanding enterprise business added to investor confidence in AI-related spending, even as the same strategist warned the sector's swings are far from over.
Micron Technology's stock rose 6.3% on Monday morning, while Sandisk's stock climbed 11%. Western Digital's stock gained 7.4%. Seagate Technology's stock added 3.7%. The PHLX Semiconductor Sector index rose about 2.7% to $12,759.52, putting it on track to enter a new bull market, according to Dow Jones Market Data.
Apple's China chip sourcing faces pushback
The Trump administration has reportedly told Apple not to buy memory chips from Chinese companies, even though a supply crunch has pushed prices higher. Apple is reportedly testing chips from Chinese memory makers ChangXin Memory Technologies and Yangtze Memory Technologies to address the shortages. According to the Wall Street Journal, Commerce Secretary Howard Lutnick said: "the Trump administration is not in favor of that."
AvaTrade trading specialist Simon Friedman said Apple's turn to Chinese memory chips was the one scenario that could have genuinely dented U.S. suppliers' pricing power over the next few years. He added that the reported pushback takes a serious long-term threat off the table for Micron, Sandisk and Western Digital. Friedman also said server makers dependent on China, including Dell Technologies and Hewlett Packard Enterprise, could face similar pressure to shift away from Chinese products.
AI revenue reports fuel optimism
Anthropic's revenue grew more than 14 times in the second quarter from a year earlier, according to a Bloomberg report, also lifting memory and storage stocks Monday. Anthropic's revenue reached more than $11.5 billion in the second quarter, compared with $787 million a year earlier. Mizuho trading-desk analyst Jordan Klein said the buy-side consensus is for Anthropic's annual recurring revenue to reach between $75 billion and $100 billion this year.
OpenAI Chief Financial Officer Sarah Friar told investors that the company's enterprise business now makes up more of its revenue than its consumer segment. OpenAI's annualized revenue run rate is now at $40 billion, CNBC reported Friday.
Sandisk's investor day and lingering volatility
Friedman said Monday's rally landed at a hot time for the chip trade after Sandisk impressed investors with its financial targets at its investor day last week. Bank of America analyst Vivek Arya said Sandisk's event suggests the industry may be entering a more durable phase compared with its typical boom-and-bust nature. Sandisk's outlook calls for 15% annual sales growth and gross margin above 80% through the end of the decade.
Still, Friedman said he would be cautious chasing the rally, given stocks in the sector fell between 30% and 40% in July. Stocks that move this violently in both directions tend to keep doing so, he said, and today's rally does not change that underlying volatility.
Source: MarketWatch
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