Key Takeaways
- Nvidia, AMD and other chip stocks rose on Friday, recovering from recent losses after analysts said they expect further gains due to surging demand for AI.
- Despite Friday's gains, many semiconductor stocks have yet to fully recover from losses earlier this month.
- July was a tough month for semiconductor stocks, as concerns over tightening trade restrictions and investors shifted to smaller caps in hopes of benefiting from Federal Reserve interest rate cuts.
Shares of chip makers including Nvidia (NVDA), Advanced Micro Devices (AMD), and Broadcom (AVGO) rose on Friday, recovering from recent declines, as analysts said they believe this year's surge in semiconductor stocks, fueled by surging demand for artificial intelligence, is far from reaching its peak.
The iShares Semiconductor ETF (SOXX) was up more than 2% in afternoon trading on Friday, recovering from Thursday's decline, but the fund is still down about 7% since the beginning of the month after a tough few weeks for semiconductor stocks.
Tough month for semiconductor stocks
Semiconductor stocks have been hit this month by concerns about tighter trade restrictions and a shift to smaller caps as investors hope they will benefit from Federal Reserve interest rate cuts.
The government reported Friday that inflation eased in June, following other positive economic data earlier in the month, bolstering expectations of a rate cut in September.
However, analysts suggest the recent pressure on semiconductor stocks may not last, as the overall rally in semiconductor stocks this year is likely to be driven by strong fundamentals and rising demand for AI.
The “AI Wave” Begins a Technology Bull Market
“We see this as just the beginning, not the end, of this tech bull market buoyed by surging AI spending,” Wedbush analysts wrote in a note Thursday.
Analysts said they expect businesses and governments could collectively spend more than $1 trillion to drive the “AI revolution” over the next few years.
Chipmakers are likely to be major beneficiaries of the surge in AI spending, with Bank of America analysts predicting that companies such as Nvidia and Broadcom, which are most involved in the data center and AI end markets, could see the biggest gains.
