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Chip Stocks’ Best Quarter Ever Is Ending With Some Wild Swings

Ryan Vlastelica

Tue, June 30, 2026 at 5:00 AM EDT7 min read

(Bloomberg) -- Chip stocks are heading for their best quarter ever, extending an extraordinary start to the year driven by insatiable demand for artificial intelligence equipment. But after recent jitters sent the stocks tumbling, investors are wondering how much further the rally can go.

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"The story of the past six months is the market going all-in on AI infrastructure, but now people are asking if this is sustainable and if we should be worried," said CJ Muse, senior managing director and technology analyst at Cantor Fitzgerald.

The Philadelphia Stock Exchange Semiconductor Index has soared 81% in the second quarter, putting it on track for its best quarter ever with one day to go. The gauge is up 94% in 2026, which if it holds would mark its best year since the dot-com boom in 1999. In contrast, the tech-heavy Nasdaq 100 Index has gained 25% in the second quarter, while the S&P 500 Index has risen 14%.

But just as the celebration is getting going, last week's selloff provides a sobering wakeup call. The semiconductor index plunged 7.9% for its worst weekly decline since April 2025 as Wall Street increasingly questions the durability of the demand for chips. And there was more volatility on Monday, as the gauge swung from being down 3.2% to close up 3.8%.

"The biggest concern is about whether hyperscalers will sustain and grow their investments beyond 2026," said Muse, who doesn't expect the spending spree to end anytime soon.

Turbulence in chip stocks is nothing new, considering the group is highly cyclical with regular booms and busts. This latest run has been powered by AI demand, which remains robust. So far, the biggest spenders — Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. — are sticking to their aggressive plans.

On the flipside, however, hardware makers like Apple Inc. have been forced to raise prices to account for the high cost of memory chips, pressuring their stocks as analysts worry about potentially weakening demand. And OpenAI is reportedly considering delaying its initial public offering, which would be a red flag for a major spender on AI chips.

The charts below chronicle a remarkable first half for chipmakers — and point to some of the key trends investors will be monitoring for the rest of the year:

Story Continues

Winners and Nvidia

Demand for memory-related products was the key driver for semis in the first half. The S&P 500 leaderboard is literally filled with memory and storage companies.

Micron Technology Inc., the largest US manufacturer of memory chips, is in second place for the year, jumping 301% in six months and taking its market capitalization above $1 trillion. The top performer is Sandisk Corp. with a 764% gain. Western Digital Corp. and Seagate Technology Holdings Plc round out the top five along with Intel Corp., which has leaped 257% as Wall Street grows more convinced that its ambitious turnaround effort is bearing fruit.

Meanwhile, South Korean memory chipmaker SK Hynix Inc. is seeking to raise $29.4 billion in a US listing.

"We're seeing investors follow the bottlenecks in semis, which at the moment is good for memory and good for Intel's resurgence as a foundry," said Sean Sun, a portfolio manager at Thornburg Investment Management, who owns a number of chipmakers.

But some high-profile companies haven't kept pace. Nvidia Corp., the poster child for AI chips and largest company in the world, is up just 4.5% this year, making it the weakest stock in the semiconductor index. Broadcom Inc., the second-most valuable US chipmaker, isn't far behind with a 7.6% gain.

"Nvidia and Broadcom are running into those bottlenecks, so they're not the high-beta names the way they used to be," Sun said. "I think they'll continue to do well, but right now investors want more torque to the strongest themes."

Everything's Expensive

The semiconductor index is trading at roughly 26 times estimated earnings, well above its 10-year average of 19 and not far from its recent high of 30 set in 2024. However, equity valuations are broadly expensive, with the Nasdaq 100 priced at 23 times forward earnings and the S&P 500 at 20.

"There are probably pockets where chips are priced for perfection and have less room for error, but overall I'd describe multiples as extended but not over-extended," Sun said. "I'm fine with these valuations given the sector's growth and positive outlook."

Analysts are increasingly optimistic about chipmakers' prospects, with earnings expected to rise 49% in 2027, up from 35% expected in April, according to data compiled by Bloomberg Intelligence. Revenue is seen climbing 37%, compared with the late April consensus of 29%, the data shows. Both anticipated rates are dramatically faster than the S&P 500, which is expected to post earnings growth of 17% in 2027 on the back of a 7.4% boost in revenue.

Of course, valuations within the sector range considerably. For example, ARM Holdings Plc is trading at more than 140 times earnings over the next 12 months, and Intel is at 100 times, both of which look severely stretched based on conventional metrics.

On the other end of the spectrum is Nvidia, which is priced at 18 times forward earnings, the cheapest since 2018 and far below its 10-year average of 36. Micron trades at about eight times earnings over the next 12 months. Some Wall Street pros view Micron's depressed valuation as a warning that revenues and profits have peaked.

Getting Volatile

While chip stocks have been on a tear in 2026, it has hardly been a straight line up. The Cboe Semiconductor ETF Volatility Index, which tracks a market estimate of future volatility, has gained 83% this year, which would be its biggest annual increase ever. The gauge is way above its 10-year average and at the highest since April 2025, when President Donald Trump's tariffs roiled markets.

And trading is getting more choppy. This month, the Philadelphia semiconductor index has closed with a move of less than 1% only one time, and it has seen a one-day gain 7.9% and a loss of more than 10%. Some of the drama reflects the impact of fickle retail investors, while hedge funds have been dumping the sector, according to Goldman Sachs' prime desk.

"There's a newness to the investor base that's exacerbating the swings, and meanwhile white papers seem to come out every week that point to new AI capabilities," Cantor Fitzgerald's Muse said. "We're going to be in this hyper-volatile market for a while."

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--With assistance from Neil Campling, Subrat Patnaik and David Watkins.

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