Chip Stocks Hit Records as Semiconductor Rally Extends
The Philadelphia Semiconductor Index closes at an all-time high as Intel surges 10%, Lam Research jumps 8.7%, and AI infrastructure spending shows no signs of slowing.
Semiconductor stocks capped their best week in months, with the Philadelphia Semiconductor Index closing at an all-time high on Friday.
The SOX index gained 2.7% on the session, extending a rally that began New Year's Day and has now delivered double-digit returns in just two weeks of trading. It's a continuation of the AI infrastructure trade that defined 2024 and 2025—and analysts see no end in sight.
Friday's Standouts
Intel stole the show with a 10.8% surge that pushed shares to their highest level since March 2024. The catalyst: a White House meeting between CEO Lip-Bu Tan and President Trump that highlighted Intel's "national champion" status in advanced semiconductor manufacturing.
But Intel wasn't alone. Equipment and manufacturing names ripped across the board:
| Stock | Friday Gain | Week-to-Date |
|---|---|---|
| Intel (INTC) | +10.8% | +15.7% |
| Lam Research (LRCX) | +8.7% | +12.4% |
| ASML | +5.0% | +9.2% |
| Broadcom (AVGO) | +3.8% | +5.1% |
| Nvidia (NVDA) | +3.0% | +4.3% |
Equipment stocks like Lam Research and ASML benefited from Intel's progress with its 18A manufacturing process. Intel's success with High-NA EUV lithography—the cutting-edge technology required for sub-2-nanometer chips—validates billions in equipment orders for the Dutch manufacturer.
The AI Spending Tailwind
Bank of America projects semiconductor industry sales will grow nearly 30% toward $1 trillion in 2026, with AI chips specifically expanding 50% or more year-over-year. That forecast underpins the sector's premium valuation.
The spending comes from hyperscalers building out data center capacity. Meta's nuclear power deals announced this week underscored the scale: the company needs 6.6 gigawatts of power just to run its AI infrastructure. That electricity runs chips—lots of them.
Nvidia remains the dominant force, but the trade is broadening. Broadcom's custom ASICs for Google and Meta position it as an alternative for hyperscalers looking to diversify away from a single supplier. AMD continues gaining data center share. And Intel's manufacturing turnaround, if it holds, opens optionality that didn't exist 18 months ago.
Valuation Reality Check
The semiconductor index trades at roughly 25 times forward earnings—not cheap by historical standards, but not at the extremes that preceded prior corrections. Nvidia at 25 times fiscal 2027 earnings looks reasonable for a company expected to grow revenue 50% annually.
The risk is the same as always: any slowdown in AI spending would hit the stocks hard. Hyperscaler capital expenditure guidance in the coming earnings season will be closely watched. If Meta, Microsoft, Google, or Amazon signals a pullback, the semiconductor rally could stall.
For now, there's no evidence of that. Every major tech CEO has emphasized AI as the priority, and infrastructure investment continues accelerating. The Prometheus supercluster, the Azure AI buildout, the Google TPU expansion—these projects require years of chip procurement.
Equipment Makers in Focus
Semiconductor equipment names may offer better risk-reward than chip designers. Lam Research, Applied Materials, and ASML benefit from any advanced manufacturing buildout regardless of which chip company wins market share.
The math is structural: leading-edge fabs cost $20-30 billion to construct. Whether Intel, TSMC, or Samsung wins the foundry race, they all need the same equipment. Bank of America forecasts 10-14% annual growth in semiconductor equipment spending through 2027, driven by high-bandwidth memory upgrades, NAND layer count increases, and leading-edge logic at 3nm and below.
That's a visibility profile that growth investors can underwrite with more confidence than betting on which chip design prevails.
Intel's Turnaround Test
Intel's 15.7% weekly gain is the most notable development in the sector. The stock had been left for dead after a brutal 2024, and the government stake—now worth nearly $20 billion—signaled that Washington viewed the company as strategically critical.
But skeptics remain. Intel needs to convert 18A technology into commercial wins against TSMC's entrenched customer relationships. AMD continues taking x86 market share. Qualcomm's ARM-based chips threaten Intel's laptop stronghold.
The Q4 earnings report on January 22 will provide the first real test of whether the manufacturing turnaround is translating to revenue. Guidance on foundry services customer traction will matter as much as the numbers themselves.
For traders, the setup is binary: execution success reprices the stock toward historical multiples, while any stumble could trigger a sharp reversal. The sector rally has provided cover, but Intel still needs to prove the comeback is real.