Chip stocks are roaring back. Semiconductor shares rallied in pre-market trading Thursday, lifting the Nasdaq 100, as investors rotated back into AI hardware names after two sessions of sharp profit-taking erased more than $500 billion in sector value.
Broadcom Inc. jumped 4.2% and Micron Technology gained 3.5% in pre-market trading Thursday, leading a broad semiconductor rebound that pushed the Nasdaq 100 higher while the Dow Jones Industrial Average slipped. The rally follows a two-day sell-off that wiped out more than $500 billion from the sector after Samsung Electronics' record quarterly profit failed to impress investors.
"The sell-off was a positioning cleanup, not a fundamental break," said Vivek Arya, semiconductor analyst at Bank of America, who reiterated a Buy rating on Micron with a $1,550 price target. "Global cloud and AI infrastructure spending could reach $1.5 trillion by 2027, with 35 percent to 40 percent directed toward memory components."
Broadcom's gains came after Apple Inc. agreed to a new multi-year deal to buy at least $30 billion in chips from the company, expanding their partnership through 2031. The agreement includes a $1.5 billion investment in Broadcom's Fort Collins, Colorado, facility to manufacture at least 15 billion chips. Micron, Advanced Micro Devices Inc., and Intel Corp. each rose more than 2.5% in pre-market trading, recovering from the July 1 sell-off that saw Micron fall 11% and Intel drop 9%.
The rebound comes at a critical juncture for the sector. The VanEck Semiconductor ETF (SMH) had surged 71% in the second quarter — its best performance since the fund launched in 2000 — before losing more than 5% on July 1 alone. Bank of America's Bubble Risk Indicator registered 0.91 for the PHLX Semiconductor Sector on a 0-to-1 scale, approaching the threshold where both upside and downside risks escalate significantly. The Cboe Semiconductor ETF Volatility Index currently sits at roughly twice the Russell 2000's level and more than triple the S&P 500's volatility measurement, indicating risk is concentrated in individual names rather than distributed across the broader market.
The SK Hynix test arrives Friday
SK Hynix Inc.'s Nasdaq ADRs are set to begin trading on July 10 after a $28 billion U.S. share sale that was more than seven times oversubscribed, according to Reuters. The debut will serve as a real-time gauge of investor appetite for AI memory exposure following the recent volatility. South Korean chip stocks have already shown signs of recovery: Kioxia rose 8.3% in Japan on Thursday, while Samsung and SK Hynix gained as dip-buyers returned to memory names.
Wall Street analysts have largely treated the pullback as a buying opportunity rather than a cycle break. UBS raised its DRAM contract-price forecasts, with DDR prices now expected to rise 32% quarter-on-quarter in the third quarter, nearly double its earlier 17% forecast. HSBC analyst Frank Lee doubled his Intel price target to $200 from $100, citing server CPU growth and foundry optionality, with design commitments expected to begin in the second half of 2026. Goldman Sachs' James Schneider raised his AMD target to $640 from $450, pointing to strong AI demand and the rising role of high-performance CPUs in agentic AI workloads.
Fed uncertainty and the CPI wild card
The rally faces headwinds from macro uncertainty. Federal Reserve Chair Kevin Warsh reiterated at the ECB Forum in Sintra, Portugal, on July 1 that inflation remains too elevated, and nine of 18 policymakers signaled support for higher interest rates at the Fed's June 17 meeting. Wall Street now expects the Fed could raise its key rate as soon as September, pushing the federal funds rate from roughly 3.6% toward 3.9%. Higher rates raise the discount applied to future earnings, disproportionately hitting high-multiple growth stocks — many semiconductor equities trade above 40 to 50 times earnings after the Q2 rally.
Next week's Consumer Price Index data will be the next major catalyst. A cooler-than-expected print could ease rate-hike expectations and provide further support for growth stocks, while a hot number would reinforce the hawkish Fed narrative. Intel reports Q2 earnings on July 23, followed by AMD on August 4 — both results will test whether fundamentals can keep pace with the valuations investors have assigned.
For investors, the divergence between bullish analyst targets and macro headwinds creates a narrow path forward. Micron trades at roughly 45 times forward earnings after its 240% Q2 surge, while Intel's foundry turnaround thesis depends on converting early customer engagement into real production orders. The SK Hynix listing on Friday will provide the first market signal on whether institutional appetite for AI memory exposure remains intact after the sector's worst single-day sell-off of the year.
This article is for informational purposes only and does not constitute investment advice.
