Investor Concerns Over AI Infrastructure Ease, Sparking Historic Rally in Chip Stocks

Key Points

Chip stocks, which fell in March amid concerns over the prospects of AI industry expansion, experienced a complete reversal in April. The Nasdaq Philadelphia Semiconductor Index surged 35% last month, with capital flooding into the chip sector. One analyst told CNBC, "The semiconductor sector's performance this month can be described as historic."

After a slump lasting about a month, dragged down by market anxiety over large-scale AI infrastructure build-out, chip stocks staged a powerful rally in April. The Nasdaq Philadelphia Semiconductor Index, composed of the 30 largest U.S. chip companies by trading volume, fell 6.3% in March. The trend reversed completely in April. As of Wednesday's close, the index had surged 35.2% for the month, with investor funds pouring into the chip sector. Intel emerged as one of the leading gainers. Boosted by better-than-expected earnings and optimistic guidance, Intel recorded its best single-day gain since 1987 last Friday. NVIDIA's market capitalization surpassed $5 trillion ahead of its earnings report. Apple also closed higher on Thursday, with its latest quarterly revenue growth exceeding expectations and its guidance also beating market forecasts. Popular U.S. chip stocks like Advanced Micro Devices and Micron Technology soared significantly, while several leading European semiconductor companies also posted substantial gains. Bruce Bateman, Chief Analyst at market research firm Omdia, stated: "The performance of the semiconductor sector this month is absolutely historic. We haven't seen a consecutive rally like this since the 1970s."

Logic Behind the Surge

David Miller, Senior Portfolio Manager at Catalyst Funds, analyzed that the semiconductor sector's surge over the past month stems from a combination of multiple positive factors: renewed confidence in the AI infrastructure cycle, improved corporate earnings guidance, and industry demand that is no longer concentrated in just a few AI leaders but is showing signs of broad-based diffusion. Miller stated that the U.S. market widely believes that AI demand is translating into tangible revenue growth, leading to upward revisions in corporate earnings expectations. In early 2026, concerns about massive AI capital expenditure plans from large tech cloud providers triggered a trillion-dollar stock sell-off in February; however, investor sentiment has gradually stabilized in recent weeks. Michael Field, Chief Equity Strategist at Morningstar, said: "Consistently positive news from AI infrastructure companies and strong earnings reports have significantly increased investor acceptance of large-scale capital expenditures, thereby warming market sentiment." Bob Savage, Head of Market Macro Strategy at BNY Mellon, believes that part of the chip stock rally is also related to the Iran conflict: the market anticipates potential supply chain disruptions, leading companies to increase chip orders for inventory building.

Is the Market Overlooking Geopolitical Risks?

Bateman cautioned that the current market is only pricing in an optimistic "smooth growth" narrative while ignoring significant real-world bottlenecks. He added that the Iran conflict has already caused critical supply chain blockages, directly impacting core stages of chip manufacturing. Helium, a key raw material for chip manufacturing and other industrial production, has seen its exports significantly restricted due to the conflict. Simultaneously, shipping route disruptions have caused delivery delays for some European companies importing semiconductor products from Asia. Reports indicate that U.S. data center expansion projects are also experiencing delays due to shortages of core equipment like transformers. Bateman stated, "It's not a lack of demand, but rather that capacity cannot keep up." Nevertheless, many analysts maintain a strongly bullish stance, firmly believing that computing power demand will continue to grow, supporting the ongoing advancement of large-scale AI infrastructure projects. Miller pointed out that as long as three key conditions remain intact, the chip sector still has room for further gains:

Capital expenditure by large cloud providers remains resilient; Corporate earnings expectations continue to be revised upwards; Investors maintain conviction that AI infrastructure investments will generate real returns.