The Chip Stock Frenzy Is Still Accelerating

The semiconductor sector is in the midst of an extraordinary wealth boom, with market gains reaching levels rarely seen in modern equity history. Over the past six weeks alone, semiconductor constituents of the S&P 500 have added roughly USD 3.8 trillion in market value. The speed and magnitude of the rally have left even seasoned investors describing the move as “surreal.”

The underlying driver is the seemingly limitless demand for computing power from AI companies. What began as a surge in demand for AI‑specific GPUs has now expanded into a broad‑based boom across memory chips, traditional CPUs, and multiple semiconductor categories. This shift reflects a structural change in AI workloads: the rise of autonomous AI agents, capable of running continuously and generating massive volumes of data, has sharply increased the need for memory and general‑purpose compute.

Chipmakers have reinforced the bullish narrative with strong first‑quarter earnings and upgraded full‑year guidance. Intel has risen 239% year‑to‑date, Western Digital has surged 558%, and South Korea’s benchmark index has nearly doubled from its lows. The challenge for investors is determining how to participate in what feels like the “last half hour of the party” while remaining vigilant about the risks of a reversal.

The rally’s tone changed meaningfully at the start of the year. For years, investor enthusiasm centered almost exclusively on GPUs powering generative AI models, while CPUs were largely ignored. But Anthropic’s latest model, recognized for its advanced autonomous‑agent capabilities, has reshaped demand patterns. AI agents require continuous operation and generate persistent data streams, lifting demand for memory chips and reviving interest in CPUs. As Jonathan Cofsky of Janus Henderson noted, the world’s wealthiest tech companies are aggressively buying every chip and every unit of compute they can secure, translating directly into soaring profits for manufacturers.

Supply shortages across chip categories are pushing prices higher, and analysts expect the imbalance to persist for years due to multiple bottlenecks limiting capacity expansion. This cycle differs fundamentally from the 2000 dot‑com bubble because it is supported by real earnings. Micron Technology illustrates the shift: after generating only USD 15.5 billion in revenue and posting an operating loss in 2023, analysts now expect revenue to reach USD 107 billion and operating profit USD 77 billion this fiscal year. Despite a 770% share‑price increase over the past year, Micron trades at just 8.9 times forward earnings—far below the S&P 500’s 23 times—making it appear inexpensive by traditional valuation standards.

Retail investors have joined institutions in driving the frenzy. Interactive Brokers data show that nearly all of the platform’s most actively traded stocks last week were chipmakers, chip‑buying tech companies, or the leveraged semiconductor ETF SOXL. SOXL, which delivers triple‑leveraged exposure to the NYSE Semiconductor Index, has surged about 1,200% over the past year. Combined daily trading volume in SOXL and its bearish counterpart SOXS has climbed to 330 million shares, the highest in at least 16 months, while leveraged S&P 500 ETFs have seen volumes fall toward yearly lows.

Market strategists warn that such vertical moves can persist longer than expected. Yet the shadow of past bubbles still looms. The semiconductor ETF SMH recorded USD 2.3 billion in outflows in the week ending May 7—the largest since its 2011 launch—just as the PHLX Semiconductor Index completed its strongest six‑week rally since March 2000, the peak of the dot‑com era.

Veteran investors who lived through that period are staying invested but quietly evaluating exit timing. Peter Feinberg, who has held Broadcom and TSMC for more than a decade, acknowledges that the gains since 2026 feel “somewhat surreal.” As he put it, “The most exciting part of the party is often the last half hour before the police come to shut it down.” For now, he continues to hold his positions while reminding himself that such conditions rarely last indefinitely.