The semiconductor sector's rally has broadened out, fueling a historic run.
The biggest gainer in the PHLX Semiconductor Index SOX on Thursday was Texas Instruments' stock, a further signal of how the chip sector's momentum is no longer just driven by artificial-intelligence plays.
Texas Instruments shares were up 19% on Thursday, while shares of other analog-chip plays like On Semiconductor and Analog Devices were up 10% and 6%, respectively.
Investors in analog stocks are encouraged by Texas Instruments' recent commentary suggesting a rebound for the formerly beaten-down category. Jefferies research analyst Blayne Curtis deemed Wednesday's earnings report to be "rock-solid," with evidence of "strengthening industrial recovery and continued acceleration of the data-center business."
The SOX, officially called the PHLX Semiconductor Sector Index, includes the 30 largest chip stocks traded in the U.S. Through Thursday's close, it has risen for 17 consecutive trading sessions. That's the longest winning streak in the 32-year history of the index. Over those 17 days, the index surged 41.1%.
Over the course of the 17-day rally, the chip sector's biggest gainers constitute a diversified group. The top three performers - Credo Technology, Astera Labs and Marvell Technology - are all buzzy AI plays. But next up is On Semiconductor, an analog-chip stock that's seen a 74% rally over the span.
UBS analyst Timothy Arcuri noted that the recent surge among semiconductor stocks has been mostly led by makers of semiconductor capital equipment and memory-chip companies. Shares of Marvell Technology and Broadcom have also offered a boost, he said, following momentum for custom chips and optical networking.
UBS analyst Timothy Arcuri has been encouraged by the AI rebound after investors had previously been worried about the sustainability of hyperscaler spending. "We view the move as reflecting improving confidence in the durability of AI-infrastructure spending," Arcuri said in a Monday note.
Arcuri also pointed to improved sentiment around memory fundamentals, with investors "increasingly realizing that the massive upside" in spending on wafer-fab equipment next year and in 2028 will likely materialize.
Investors may be questioning what comes next, Arcuri added, noting that shares of ASML Holding and Taiwan Semiconductor Manufacturing didn't pop despite posting earnings beats.
Outside of the analog-chip stocks, Arcuri said that makes him "wonder whether stocks [are] now set up for a similar lack of follow-through in the very near term over the next few weeks of earnings season." He noted that, on average, the SOX index has been up about 1% in the month following a rise of more than 20%.
Thursday's chip-sector gains come as investors were bailing on software stocks in the wake of downbeat data points from ServiceNow and International Business Machines. The iShares Expanded Tech-Software Sector ETF IGV was down 5% on the day.