Semiconductor companies are drawing attention on Wall Street as their stocks have shown sharp swings this month. Investors expect a group of newly prominent firms to account for nearly half of the S&P 500’s profit growth in the second quarter.
The PHLX Semiconductor index has risen sharply this year, driven by strong results at companies including Micron Technology, Advanced Micro Devices and Broadcom. Yet the 30-stock index has turned volatile lately. It is up 65 percent for the year, versus a 9 percent gain in the S&P 500, but has fallen 18 percent in July after moving at least 3 percentage points on six of the month’s 12 trading days. The index closed Friday more than 20 percent below its late-June record high.
Concerns over the durability of artificial-intelligence demand and the sector’s trading swings have led investors to reassess chip stocks. Earnings are expected to be robust, yet questions remain whether they will halt the summer decline and whether weakness could spread to broader markets.
“The daily moves for companies this big are just shocking,” said Rick Meckler, partner at Cherry Lane Investments. “Would the earnings picture change that? Certainly a disappointing outlook could.”
Earnings for S&P 500 semiconductor and equipment firms are projected to jump 133 percent from a year earlier and contribute about 44 percent of overall S&P 500 earnings growth, according to LSEG analyst Tajinder Dhillon. Overall S&P 500 earnings are forecast to rise 26 percent.
Intel and Texas Instruments are scheduled to report this week, while Nvidia will release results in late August. Recent reactions suggest sentiment may be shifting. Shares of Taiwan Semiconductor Manufacturing slipped Thursday despite a 77 percent rise in second-quarter profit. Samsung Electronics shares also fell sharply earlier this month after reporting a large profit increase.
Some observers link the volatility to retail interest in the index and the growth of leveraged exchange-traded funds, which can amplify moves by increasing buying on rises and selling on declines. South Korea’s regulator recently introduced measures to curb volatility from single-stock leveraged ETFs tied to Samsung and SK Hynix.
Rising AI spending has fueled chip demand, yet some analysts worry the optimism may be excessive. Chipmakers remain cyclical businesses, though demand now spans data centers, industrial electronics, wireless communications and automobiles, suggesting a broader base of support.
