US chip stocks have staged a significant rebound driven by strong earnings reports, edging within striking distance of a technical bull market. However, some analysts warn that backlog figures may not necessarily translate to realized revenue, and the sustainability of AI infrastructure investment remains in question.
On Wednesday, the Philadelphia Semiconductor Index (SOX) closed 2.49% higher at 12,399.38 points, just 1.1% shy of the 12,536.99-point threshold needed to enter a bull market. This rally was ignited by earnings from CoreWeave, Super Micro Computer, and Lumentum, all of which indicated robust AI spending. Their share prices surged approximately 19%, 19%, and 13%, respectively, in a single day.
However, Dan Kemp, founder of investment advisory firm Portfolio Thinking, poured cold water on the market enthusiasm.
He pointed out that CoreWeave raised its full-year capital expenditure plan from $31 billion to $35 billion, up to $35 billion to $39 billion, but its revenue guidance remained "far more conservative." Additionally, the company reported net interest expenses of $640 million for the quarter, compared to an adjusted operating profit of just $128 million. "We have yet to see consumer and corporate spending that supports commitments of this magnitude," he said.
Earnings from Downstream AI Chain Boost Sector Sentiment
On Wednesday, the rally in chip stocks was broad-based. In the memory chip space, Sandisk rose about 6%, Micron Technology gained roughly 5%, and SK Hynix's American depositary receipts surged 9%. AI chip leader Nvidia climbed 3%.
The immediate catalyst for this uptick came from several earnings reports released after Tuesday's market close. Brian Mulberry, chief market strategist at Zacks Investment Management, noted in written commentary that these results "help confirm that the AI trade is broadening, not just getting bigger."
He explained that CoreWeave confirmed GPU demand remains strong, while Lumentum demonstrated how this demand is further driving the need for data center power and operational infrastructure.
Dan Kemp also agreed that the earnings of companies like CoreWeave and Super Micro, which are downstream in the AI supply chain and responsible for connecting and installing chips, provide investors with a window into actual chip demand, further supporting optimism in the sector.
Additionally, he noted that the US Consumer Price Index (CPI) data released on Wednesday largely aligned with Wall Street expectations, which also contributed to the chip stock rally.
Backlog Figures Spark Skepticism
Despite the upbeat market sentiment, some analysts remain cautious about the value of backlog figures. Both CoreWeave and Super Micro highlighted growing backlogs in their earnings reports, with Super Micro reiterating that it received over $60 billion in new orders for the June quarter.
Dan Kemp expressed skepticism about these figures, citing the potential for cancellations or delays. "Investors are entitled to view a large backlog as a positive signal, but they should price it as a range of possible outcomes, not as realized revenue," he said.
He further pointed out that for long-term investors, the core issue is whether the growth rate of demand is faster than what is implied by the stock price. "On this front, the evidence is far less reassuring," he added.
Fundamentals Diverge, Not All Chip Stocks Benefit Equally
Brian Mulberry emphasized that not all chip companies benefit equally from the AI boom, and fundamentals will ultimately prove more important than pure price momentum. He said investors are currently seeking accelerating growth, rather than simply chasing the trend.
In his view, the companies with the strongest fundamentals include Nvidia, Broadcom, and optical network supplier Coherent, whose shares rose over 8% on Wednesday. Dan Kemp held a similar view, arguing that the alignment between demand growth rates and valuations is the key to determining long-term investment value.