Semiconductor Stocks Rally on AI Demand

What happened: Semiconductor stocks surged at the start of the week, led by Western Digital, Seagate, Micron Technology, Advanced Micro Devices, and Intel. This rally was driven by strong demand for AI-related products, with Micron's revenue and earnings up 196% and 682% respectively in the second quarter. HPE shares jumped nearly 29% on strong AI infrastructure demand, and Jim Cramer's CNBC Investing Club highlighted AI-related semiconductor stocks such as Micron, Intel, AMD, and Qualcomm.

Market impact: The AI trade led markets higher, with the VanEck Semiconductor ETF (SMH) marking its largest monthly percentage gain ever at 32.2% in April. This rally was broad-based, with stocks like LRCX, KLIC, and MRVL reaching new highs. The AI boom is driving global data center spending, expected to top $1 trillion in 2026, benefiting semiconductor stocks and companies like AT&S investing in AI-related infrastructure.

What to watch next: Micron and Intel's earnings reports in late June and early July will provide updates on their AI-driven growth. Additionally, investors should monitor Alphabet's $190 billion AI infrastructure spending, which could accelerate benefits for semiconductor companies like Broadcom, Taiwan Semiconductor, and Nvidia. Lastly, the iShares Semiconductor ETF's performance will indicate the broader semiconductor sector's trajectory, given its concentration and cyclical nature.