Chip Stocks on Track for Best Quarter Ever

**SPEAKER_2** (0:02)
Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco.

**Ed Ludlow** (0:22)
This is Bloomberg Tech coming up. Chip stocks are headed toward their best quarter ever, but recent swings are making investors concerned about the durability of the AI boom. Plus Taiwan raids the offices of Super Micro as part of an investigation into the alleged smuggling of Nvidia chips into China and a billion-dollar misunderstanding leaves Korean investors empty-handed in the blockbuster SpaceX IPO.
Everything is about semiconductors at the moment. In the here and now, the NASDAQ 100 is higher, and there is outperformance in chip stocks on the Sox today's session, but also over the last three months. We have to zoom out. The Sox is now on track for its best quarter on record ever. With the final trading day of June and the second quarter upon us, the Sox is up 86% over the last three months. It's also up almost 100% year to date. I would make the point they're only halfway through the year. We'll see where we net out when the year ends. Even after recent swings, this has become a historic rally driven by one question, how long can the AI infrastructure spending boom last? Let's go out to Bloomberg Tech equity reporter, Ryan Vlostelica. You've been writing about this on the Bloomberg, and the main point being that we're on track for the biggest quarter ever on the Sox, but there have been swings. There has been volatility. What do we need to know?

**Ryan Vlostelica** (1:44)
Hey, yeah, so this has been a very volatile quarter for Sox, although the general move has been not just up, but dramatically up. But just to give you a sense of the volatility, just yesterday, the Sox at one point fell 3%, then it reversed course, and it ended up 3%.
So a six percentage point swing within a day, and this isn't coming on any kind of fundamental change in the outlook. People are really having a lot of debates right now about how long is this AI capex going to stay at the level that it's been for the past few years? And it's not just at this level, but it's been accelerating. How much longer can we continue to expect that kind of spending acceleration going forward? And if it starts to slow down, does that mean that we're actually at peak earnings right now? And if that's the case, what is the outlook for the stocks, especially following the move that we've had?

**Ed Ludlow** (2:35)
Phase one of the AI wave of this decade, at least, was Nvidia, right? And if you expanded that, GPUs can compute.
Right now, what's driving this is memory and storage. Could you just explain a little bit the biggest contributors to the rally that we've seen in chip stocks overall?

**Ryan Vlostelica** (2:55)
Yeah. So I'd say the real story this year has been, in particular, Micron, but also Sandisk, Western Digital, Seagate, all of these companies that are involved in memory and storage, people are really starting to appreciate how central this is when you're building out data centers. And these companies have seen astronomical growth, including Micron, with I believe it was just last week that its report came out. And it talked to, and again, extremely robust forecast, really pointing to how they see visibility for a really extended period of time. This is a real change from the way Micron and other companies like this have historically operated, where they were far more cyclical, moving on consumer trends including phones, PCs, video game consoles, that kind of thing. What we've seen, Apple come out and they're increasing their prices for phones and iPads and so forth. Microsoft came out and said it's going to raise the price for the Xbox because of higher memory. This has really been the story right now. This has really been the bottleneck in the AI trade. There simply are not enough memory chips being made to meet all this demand, which means that demand is likely going to stay elevated for really the foreseeable future, probably into 2027, maybe into 2028 I've had some people say maybe as early as 2020, 30 is when this is really going to start to change.

**Ed Ludlow** (4:12)
Ryan, the biggest question in technology and in markets is always what happens next? Is there any sense from strategists and analysts of whether the stocks continues on this like an amazing trajectory for the balance of 2026?

**Ryan Vlostelica** (4:28)
Well, I will say that most people are very confident about the fundamental story. So they do expect the CapEx to continue. They expect the demand to remain extremely high. The question of course is really how much will that continue to translate to the stocks the way they have been? I think there's a little bit more skepticism about that. Some of these stocks, including Intel, including Arm, they are very expensive on traditional valuation metrics. A company like Micron looks pretty cheap, but historically that's been a bad time to buy it because that signals it's more near peak earnings. But again, you go back to the question of, is this actually peak earnings or is this cycle very different than historical ones? And we're not anywhere near that kind of peak yet. So as far as what's going to happen, obviously nobody knows. It seems hard to imagine that we'll see another, what, 90% move over the next three months. But of course, you know, all that remains to be seen. But certainly this is where the momentum is in the market right now.