AI Earnings Shine as Chip Stocks Near Bull Market! Analysts Warn: Don’t Celebrate Too Soon?

According to MarketWatch, semiconductor stocks are once again approaching bull market levels, driven by recent strong corporate earnings. However, some analysts warn these results may not be enough to justify broad market optimism.

Semiconductor shares performed strongly on Wednesday (12th), with SanDisk (SNDK-US) and Micron Technology (MU-US) rising approximately 6% and 5%, respectively. SK Hynix (SKHY-US), another major beneficiary of memory chip demand, saw its ADR surge 9%.

AI chipmakers Nvidia (NVDA-US) and Advanced Micro Devices (AMD) (AMD-US) gained 3% and 2%, respectively.

The Philadelphia Semiconductor Index closed at 12,399.38 on Wednesday. According to Dow Jones Market Data, the index must rise to 12,536.99 points to enter a new bull market. Generally, a bull market is defined as an index rising at least 20% from its recent low.

This rally followed after-hours earnings releases on Tuesday from CoreWeave (CRWV-US), Super Micro Computer (SMCI-US), and Lumentum (LITE-US), which indicated that AI spending remains strong.

Dan Kemp, founder of investment advisory firm Portfolio Thinking, noted that these companies sit further downstream in the AI supply chain, responsible for connecting and installing chips for use. Therefore, their earnings provide investors with a more direct view of actual chip demand, further supporting market optimism toward the semiconductor sector.

"It's worth noting the scale of commitments underpinning this demand," Kemp said. He cited emerging cloud provider CoreWeave as an example. The company raised its full-year capital expenditure guidance from $31–35 billion to $35–39 billion, but its revenue outlook remains "considerably more muted."

Kemp also pointed out that CoreWeave reported second-quarter net interest expenses of $640 million, while its adjusted operating income was only $128 million. "We haven’t yet seen consumer and enterprise spending sufficient to justify such large-scale spending commitments."

Both CoreWeave and Super Micro emphasized that backlog orders continue to grow. The latter reiterated that new orders for the quarter ending in June exceeded $60 billion.

However, considering that some orders may ultimately be canceled or delayed, Kemp said he remains skeptical of these figures.

"Investors have good reason to view massive backlogs as a positive signal, but they should treat them as a range of possible outcomes, not realized revenue," he said.

He added that Wednesday’s chip stock rally might also have been influenced by the Consumer Price Index (CPI) report released earlier that day, which generally met Wall Street expectations.

Shares of both CoreWeave and Super Micro surged 19% on Wednesday, while Lumentum Holdings, which supplies optical components for data centers, rose over 13%.

Meanwhile, Brian Mulberry, chief market strategist at Zacks Investment Management, said these earnings reports "help confirm that the AI trade is expanding, not just getting bigger."

He explained that CoreWeave confirms strong GPU demand, while Lumentum shows how this demand is further driving infrastructure needed to support and run these chips.

Nevertheless, Mulberry believes not all chip companies will benefit equally, so "fundamentals will ultimately matter more." Investors are currently seeking accelerated growth, "not just pure stock momentum."

In his view, Nvidia (NVDA-US), Broadcom (AVGO-US), and fiber-optic networking equipment supplier Coherent (COHR-US) possess the strongest fundamentals.

Kemp shares a similar perspective, stating that for long-term investors, the key question is whether demand growth is outpacing what is already reflected in current stock prices. "On that front, the evidence so far is far from reassuring."