Investors worry about missing out on chip stocks.
The Philadelphia Semiconductor Index, which tracks the world’s 30 largest semiconductor makers, soared to its highest level in 14 months this week on the back of a blowout performance from Nvidia.
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Those gains have lifted the index 38% so far this year, well ahead of the tech-heavy Nasdaq Composite. The latter includes Apple and Google parent Alphabet, whose shares have risen by a quarter over the same period.
Nvidia leads because of its dominance in delivering chips that can handle the enormous computing power needed to quickly create human-like text, images and content.
The U.S. group’s market capitalization soared more than $184 billion this week to nearly $1 trillion after it forecast sales of $11 billion over the next three months, beating consensus estimates by nearly $4 billion. “It’s the largest gain we’ve ever reported,” analysts at Bank of America said.
But the likes of AMD, Marvell Technology and Applied Materials have also soared this year, rising around 95%, 70% and 40%, respectively.
Analysts at Bespoke Investment noted: “Nvidia is the clear leader, but two-thirds of the (Philadelphia Semiconductor Index) constituents have outperformed the S&P 500 year-to-date and more than one-third of the gains have been driven by the S&P 500. Triple the Index” group in New York.
Demand from institutional investors appears to have underpinned the chipmaker’s recent rally. According to VandaTrack, they are a “major source of demand” for AI stocks, with only a “slight increase” in interest from retail investors.
Despite the hype, “the latest AI trend remains relatively small compared to 2021’s meme stock bubble,” the data provider said.
Even so, AI remains a topic on the minds of many executives. A record 110 S&P 500 companies mentioned the term “artificial intelligence” on their first-quarter earnings calls, according to FactSet.
“The rebound in AI-related companies in particular has raised concerns that the sector is currently in a bubble,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. Meanwhile, “we don’t think the AI-related rally is sustainable” .