Momentum from the U.S.-China trade agreement to reduce reciprocal tariffs on Monday fueled the semiconductor sector to its highest close since February.

The PHLX Semiconductor Index, which tracks 30 large semiconductor companies trading in the U.S., was up 7% at the end of the trading day on Monday, amid a broader stock-market rally spurred by the U.S.-China trade deal. The $4,780.93 close was its highest since Feb. 26, when it closed at $4,990.82, but is about 19% lower than its all-time closing high of $5,904.54 in July 2024, according to data compiled by Dow Jones Market Data.

On Monday, U.S. and Chinese officials said they agreed to cut back tariffs on each other for a 90-day period. As part of the agreement, the U.S. will cut tariffs on Chinese goods from 145% to 30%, while China will reduce tariffs on the U.S. from 125% to 10%.

"This is clearly just the start of ... broader and more comprehensive negotiations, and we would expect both these tariff numbers to move down markedly over the coming months as deal talks progress," Wedbush analysts said in a note on Monday. They added that they "believe new highs for the market and tech stocks are now on the table" for the rest of the year, as investors will be following trade discussions in the coming months. Meanwhile, from their perspective, the "massive tariff reductions at this time likely take a recession off the table for now."

Shares of Nvidia Corp. $(NVDA)$ gained 5.4% on Monday, while Advanced Micro Devices Inc.'s $(AMD)$ stock rose 5.1%. Broadcom Inc.'s $(AVGO)$ stock climbed 6.4% higher, while Qualcomm Inc.'s $(QCOM)$ advanced 4.8%. The index's biggest gainer was Lattice Semiconductor Corp. $(LSCC)$, up 12.8%. Intel Corp.'s $(INTC)$ stock saw the smallest gain of the bunch, up 3.5%.

Meanwhile, Nvidia and its fellow "Magnificent Seven" group of tech stocks gained more than $830 billion in market capitalization off of the agreement on Monday. Nvidia itself contributed $155 billion to that.

Analysts at Melius Research stayed upbeat on Nvidia's stock on Monday, noting that more clarity on tariffs and trade relations with China makes the company "much more investable." However, an upcoming decision by President Donald Trump on imports of semiconductors under Section 232 of the Trade Expansion Act has the tech supply chain "scrambling to meet near-term demand for certain items that seem to be surging temporarily," such as personal computers and smartphone components.

In a separate note containing charts, the Melius analysts argued that it's time to get "back to fundamentals" on Nvidia. "Everything needs an accelerator," they wrote. Meanwhile, the stock's price-to-earnings multiple is near a five-year low, they said.

-Britney Nguyen

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May 12, 2025 17:32 ET (21:32 GMT)

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