The frenzied rally in chip stocks passed a new milestone on Wednesday, with the PHLX Semiconductor Index posting its best start to a year on record.

Even by the standards of the artificial-intelligence boom, the gains have been extraordinary. Sandisk has soared 570% this year. Intel has more-than tripled. Samsung, Micron and SK Hynix have all climbed into the ranks of $1 trillion companies. And Advanced Micro Devices now has a higher valuation than JPMorgan Chase.

Investors' enthusiasm for the building-blocks of artificial intelligence helped pull the stock market out of its Iran-war slump, while raising worries that a surge this dramatic must end sometime. SK Hynix added 9.3% in South Korea on Wednesday, while Micron rose another 3.6% to help lift the S&P 500 and Nasdaq composite to new records.

Here's a look at where the chip rally stands:

A record start

The semiconductor index has climbed 82% so far in 2026, its best-ever performance over a year's first 100 trading days. The previous record was in 1995, years before the dot-com bubble burst.

The index's rise masks the blowout performance of some of its biggest components, including Intel, which has risen more than 200% thus far this year. Companies in the index have added around $5.7 trillion in market capitalization, according to Dow Jones Market Data.

Surging demand

Behind the rally: a global memory chip shortage that has fueled staggering profits at chip makers around the world. Demand is surging across pretty much every category of chips, from the more basic CPUs that companies such as Intel, Arm Holding and Advanced Micro Devices specialize in, to the AI accelerators, or GPUs, made by Nvidia, to the memory chips that allow servers to store the caches of data required to operate AI models.

The hourly cost to rent an Nvidia B200, for example, has nearly doubled in the last three months, rising from $2.66 on Feb. 9 to $5.27 today, according to data-provider Ornn. Daily spot rates for DDR5, a common type of memory chip used for both gaming and AI computing, have more than doubled to $22.50 since November, Ornn said.

More varieties

The meteoric rise of AI agents -- autonomous tools that perform a range of tasks using machine learning, from coding to organizing travel plans -- has also resurrected the market for CPUs, or central processing units.

Intel shares jumped 20% in April after the company reported that quarterly sales in its data center segment, driven largely by CPUs for agentic AI, had surged to $5.1 billion, beating Wall Street expectations. Nvidia, which sells both CPUs and GPUs, reported fresh records for revenue and income last week, thanks to blistering demand.

Above trend

The semiconductor index now sits far above its 50-day moving average, a period that includes the chip-stock melt-ups that began in April, juiced by strong earnings and investor optimism after the U.S. and Iran struck a cease-fire. The index is even further above its 200-day moving average, a technical signal that smooths out additional volatility.

Analysts often consider moves above or below those averages as signals for the market's path forward.

Private markets

Total private-market deals relating to AI infrastructure totaled $80 billion in the last quarter of 2025, a multiyear high, according to industry researcher PitchBook, but data suggests a cool-down in deal size so far this year. While most of the deals in AI infrastructure come from the venture capital side -- producing around 400 deals each quarter -- private equity drives most of the deal value.

Investor enthusiasm for public- and private-market investments could be tested in the months to come, HB Wealth Chief Market Strategist Gina Martin Adams wrote in a note on Wednesday. A pullback in spending by hyperscalers such as Google and Amazon, the release of AI models that require less computing power than what's being built, or negative policy changes could all have a dampening effect on stock performance, she said.

Room to run?

To some, semiconductor stocks still look like a bargain, despite the run-up in their prices. That is because price-to-earnings ratios have come down from their peaks as these firms have boosted profits. Companies in the index were recently trading around 26 times their next 12 months of earnings, compared with their 10-year average P/E ratio of 21 times -- and far below their dot-come era peak.

The profits underpinning chip companies' stocks are a distinction from the dot-com bubble, however, when many of the biggest winners had little or no earnings. Micron's profits have increased so much that shares trade at 10 times the company's projected earnings over the next 12 months, according to London Stock Exchange Group, compared with the S&P 500's P/E ratio of 22 times.