Chip Stocks Are On Fire — Will It Last?

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**Ed Elson** (1:45)
Welcome to Prof G Markets. I'm Ed Elson. It is July 1st. Let's check in on yesterday's market vitals. The major indices climbed as stocks closed out their best quarter in six years. The Dow finished its best first half since 2021, and the Russell 2000 wrapped up its best first half since 1991 Meanwhile, Brent crude was roughly flat on the day as investors awaited news from talks in Iran. The yield on 10-year treasuries climbed as job openings data showed a stable labor market. And finally, Bitcoin dipped below $60,000 once again.
OK, what else is happening? Semiconductors just posted their best quarter ever. The Philadelphia Stock Exchange Semiconductor Index rose 82% in the second quarter, and is up 94% so far this year. Western Digital is up 240%, year-to-date Micron is up 310%, SanDisk is up more than 700%.
But the rally hasn't been entirely smooth. Last week, chip stocks fell 8% in their worst week since April 2025 But that isn't saying that much. Still, the stunning run-up and the turbulence along the way leaves investors with one big question, and that is, how long can this semiconductor boom actually last? Joining us to help answer that question, we are speaking with Stacy Rasgon, senior analyst at Bernstein.
Stacy, thank you so much for joining us on the show. This has been just a crazy run-up that not many people predicted. I mean, AI is winning, but not everyone in AI is winning. Big tech certainly isn't. But the semiconductor stocks are. We'll get into how sustainable this actually is. But first, just your reflections on what's been a crazy quarter.

**Stacy Rasgon** (3:40)
You bet. And I mean, semis have been the primary beneficiary here. And as you said, the SOX index is up almost 100 percent. Actually, it may even be 100 percent after today's close year to date. And AI has just gotten so big, it's dragging everything along in the space. You could have almost owned anything, you would have been just fine. It's interesting though, some of the divergences we've seen this way. So that the traditional sort of like blind AI winners that you would think the invidias and the broadcomers of the world that are doing the actual AI accelerators, they've actually had the worst performance. They're up, but they're up not anywhere near as much as the sector. And the reason is people have been playing the so-called bottlenecks.
Again, as AI has grown like sort of one area of the space at a time followed by the next, you've been sort of hitting the limits of what they can supply and then prices go up. Semi-investors love to play bottlenecks and so the stocks have gone up.
We went from the accelerators to the memory, to the semi-cap, to the optical, to the networking, to the power semis, to the CPUs. Now, people are playing discreet and other things.
It's really been kind of remarkable. Overall, though, you could have owned almost anything in the space year to date. You would have been sitting pretty pretty.

**Ed Elson** (4:53)
Yeah. Semiconductors now make up a fifth of the S&P.

**Stacy Rasgon** (4:58)
Is it that much?

**Ed Elson** (4:58)
Wow. Which I just find stunning. Twenty percent of the entire market. When you look at that divergence between the obvious AI names and the less obvious AI names, and I think that is a pretty good distinction as to who's been winning in this market and who hasn't, at least in 2026