Chip stocks rose on Monday, as a flurry of reports offered investors more confidence in the sustainability of the artificial-intelligence boom.
For one, the Trump administration has reportedly told Apple not to buy memory chips from Chinese companies even as a supply crunch has sent prices higher. The iPhone maker said in June that it will eventually have to pass some of those costs down to customers.
While Apple is reportedly testing chips from Chinese memory makers ChangXin Memory Technologies and Yangtze Memory Technologies to address the shortages and price hikes, U.S. Commerce Secretary Howard Lutnick told the Wall Street Journal that “the Trump administration is not in favor of that,” according to a Friday report.
Micron Technology’s stock rose 4.1% on Monday. It has risen 17.5% over five consecutive days to seal its longest winning streak since January, according to Dow Jones Market Data. Sandisk’s stock climbed 8.9% on Monday, while storage makers Western Digital and Seagate Technology also saw their stocks gain 5.4% and 2.2%, respectively.
The PHLX Semiconductor Sector entered a new bull market on Monday after it rose 1.6% to close at 12,621, according to Dow Jones Market Data. The index was in a bear market for 21 days, making for its shortest period in that territory since March 2020, the data showed. Credo Technology Group was the best-performing stock since the SOX entered a bear market on July 29, up 59.4% in the period, according to the data.
AvaTrade trading specialist Simon Friedman said Apple’s turn to Chinese memory chips “was the one scenario that could have genuinely dented U.S. suppliers’ pricing power over the next few years.” Therefore, the reported pushback from the Commerce Department “takes a serious long-term threat off the table for Micron, Sandisk and Western Digital,” he told MarketWatch in emailed comments.
He added that server makers that depend on China, including Dell Technologies and Hewlett Packard Enterprise could face similar pressure to move away from Chinese products, which “could create a broader structural tailwind for” U.S. chip names.
Neither Apple nor the White House immediately responded to MarketWatch’s requests for comment.
Meanwhile, a report from Bloomberg said that artificial-intelligence startup Anthropic saw its revenue grow more than 14 times in the second quarter from a year ago — also driving optimism for memory and storage players on Monday.
Mizuho trading-desk analyst Jordan Klein said in a note to clients that “bullish financial updates from frontier model builders Anthropic & OpenAI” are the main near-term catalyst for chip stocks, in his view, as the rivals race toward initial public offerings.
Anthropic’s revenue reached more than $11.5 billion in the second quarter compared with the $787 million it recorded for the same period the previous year, according to Bloomberg’s Friday report, which cited a review of preliminary documents from the company.
Klein also pointed to a report saying OpenAI Chief Financial Officer Sarah Friar told investors that the company’s enterprise business now makes up more of its revenue than its consumer segment. The ChatGPT maker’s annualized revenue run rate is now at $40 billion, CNBC reported on Friday.
Klein said the buy-side consensus is for Anthropic’s annual recurring revenue to reach between $75 billion and $100 billion this year, and he noted reports that the company could see this figure at between $180 billion and $200 billion by the end of next year.
That would turn into “a lot of” spending on AI chips, memory components, networking and other data-center hardware, Klein said.
Though Anthropic is facing chip constraints and slower enterprise adoption of its technology, Klein said the acceleration in its revenue growth is the key for investors.
“You want bullish growth rates and financial updates that suggest material acceleration with more to come to sustain semi bullishness,” and to encourage more investors back into the space after it experienced a selloff in July, Klein said.
Neither Anthropic nor OpenAI immediately responded to requests for comment from MarketWatch.
AvaTrade’s Friedman said Monday’s action was coming at a hot time for the chip trade after Sandisk impressed investors with its financial targets at its investor day last week.
Bank of America analyst Vivek Arya said in a note to clients that Sandisk’s event “suggests the industry may be entering a more durable phase” compared with its typical boom-and-bust nature.
Sandisk’s outlook for 15% annual sales growth and for its gross margin to remain above 80% through the end of the decade thanks to its new customer agreements and supply strategy offer “a framework for how investors may ultimately view memory stocks,” Arya said.
Still, Friedman said he would “be cautious chasing it here,” given stocks in the sector fell between 30% and 40% in July.
“Stocks that move this violently in both directions tend to keep doing so, and today’s rally, however well justified by the news, doesn’t change that underlying volatility,” Friedman said.
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