The chip world had a rough start to the week. Investors worried that the massive spending on artificial intelligence was finally slowing down. That selloff erased more than $1 trillion in market value from chip stocks in just a few days.
Then Thursday happened.
A sharp rally in chip stocks erupted Thursday after Microsoft and Lam Research both posted strong earnings. Microsoft popped 15%, heading for its best day since 2008, as it reported strong growth in Azure and said it is lifting capital expenditures on robust demand. Lam Research shares surged 18% and were on pace for their largest daily percentage increase since 1999. The company reported impressive earnings and an upbeat outlook driven by AI-related demand.
Nearly every major chip stock joined the rally. Advanced Micro Devices surged 13%. Applied Materials surged 15%.
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Intel climbed 11%. Marvell Technology added 13%. Nvidia rose nearly 3%.
The iShares Semiconductor ETF popped 8%.
The selloff earlier this week erased over $1 trillion in market value from chip stocks, fueled by worries that the AI spending boom might be nearing its peak. Thursday's rally, driven by the strong earnings reports, restored some of that lost value and reinforced the view that demand for AI infrastructure continues to grow.
These earnings have helped restore confidence that capital expenditure on AI infrastructure remains robust. The strong results from Microsoft and Lam Research suggest that cloud providers and chip equipment makers continue to see accelerating demand, which could signal sustained growth for the broader semiconductor ecosystem.
Memory chip makers had their own reason to celebrate. Samsung, the South Korean giant, cautioned that the memory supply shortage might extend through 2028.
Shares of Micron and Sandisk rose 18% and 26%, respectively. Those stocks had declined in prior sessions after South Korea's SK Hynix reported underwhelming results.
Arm Holdings also lifted sentiment. The company rose 7% as its debut custom chip, the AGI CPU, experienced robust demand, and it aims to challenge established tech giants in physical silicon. CEO Rene Haas told CNBC that the product has already secured orders worth over $2 billion for fiscal years 2027 and 2028. "The demand for the product is great, and more importantly, I think it underpins the fact that the market for CPUs, for agentic workloads and around inference is just key, and we're just seeing that grow," he said.
Semiconductor stocks have been among the biggest winners of the AI era, as corporations pour money into memory and central processing units to support the infrastructure buildout. The combination of strong earnings from key players and a prolonged memory shortage suggests that the chip industry's growth trajectory remains intact, even as some investors worry about a potential peak in spending.
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