Chip stocks broadly rose on Monday, as a string of latest developments reinforced investor confidence that the artificial intelligence (AI) boom remains sustainable, according to MarketWatch.
First, the Trump administration has reportedly told Apple (AAPL-US) not to purchase memory chips from Chinese companies. Memory chip supply is currently tight, which has already pushed prices higher. Apple said in June that it may eventually have to pass some costs on to consumers.
Reports indicate that Apple is currently testing chips from Chinese memory manufacturers CXMT and YMTC to address supply shortages and rising prices. However, according to a Wall Street Journal report on Friday, U.S. Commerce Secretary Howard Lutnick said "the Trump administration does not support this approach."
Micron Technology (MU-US) rose 4.1% on Monday. According to Dow Jones Market Data, Micron has risen for five consecutive trading days, with a cumulative gain of 17.5%, marking its longest winning streak since January. SanDisk (SNDK-US) surged 8.9% on Monday. Other storage device makers also moved higher, with Western Digital (WDC-US) up 5.4% and Seagate Technology (STX-US) up 2.2%.
The Philadelphia Semiconductor Index rose 1.6% on Monday to close at 12,621 points, officially entering a new bull market. The index had been in a bear market for 21 days, the shortest bear market period since March 2020. Since the index entered bear market territory on July 29, Credo Technology (CRDO-US) has been the best-performing stock, gaining 59.4% during that period.
Simon Friedman, a trading expert at AvaTrade, said Apple's pivot toward Chinese memory chips "is the only scenario in the coming years that could genuinely undermine the pricing power of U.S. suppliers." He believes the Commerce Department's reported move to block this amounts to "eliminating a major long-term threat for Micron, SanDisk, and Western Digital."
He also added that U.S. server manufacturers such as Dell Technologies (DELL-US) and Hewlett Packard Enterprise (HPE-US), if heavily reliant on Chinese supply chains, could face similar pressure to reduce their dependence on Chinese products, which could create broader structural tailwinds for U.S. chip-related companies.
Separately, a Bloomberg report indicated that AI startup Anthropic's second-quarter revenue grew more than 14-fold year-over-year. This news also further boosted investor optimism toward memory and storage companies on Monday.
Jordan Klein, a trading desk analyst at Mizuho, said in a note to clients that he believes the biggest near-term catalyst for chip stocks is "strong financial results from Anthropic and OpenAI, the two advanced AI model companies." Both companies are currently competing toward IPOs.
According to the report, Anthropic's second-quarter revenue has exceeded $11.5 billion, far higher than the $787 million recorded in the same period last year.
Klein also pointed to another report. OpenAI CFO Sarah Friar told investors that the company's enterprise business revenue share has now surpassed its consumer business. CNBC reported on Friday that OpenAI's current annualized revenue run rate has reached $40 billion.
Klein noted that the current consensus expectation on the buy side is that Anthropic's annual recurring revenue (ARR) this year could reach $75 billion to $100 billion. Some market reports even suggest that Anthropic's ARR could further reach $180 billion to $200 billion by the end of next year.
If that scale is achieved, Klein believes it would mean the AI industry needs to invest "massive" amounts in AI chips, memory components, networking equipment, and other data center hardware.
Although Anthropic still faces chip supply constraints and enterprise customer adoption of its technology has slowed, Klein believes that what matters most to investors is that its revenue growth is accelerating. "Investors need strong growth rates and financial results showing that growth is materially accelerating and will accelerate further, which is what sustains the bullish sentiment in the semiconductor sector."
AvaTrade's Friedman said Monday's strength in chip stocks came at a particularly critical moment. SanDisk's investor day last week had left investors impressed with the company's financial targets.
Bank of America analyst Vivek Arya said in a note to clients that SanDisk's investor day "suggests the industry may be entering a more durable phase."
This differs from the memory industry's typical "boom-bust" cycle. SanDisk expects 15% annual revenue growth, with gross margins maintained above 80% through the end of the decade, supported by new customer agreements and supply strategies. Arya said these outlooks provide a framework for how investors should view memory stocks going forward.
Despite optimism about the chip industry's prospects, Friedman said, "I would be cautious about chasing this rally here." The sector's stocks fell 30% to 40% in July. "When stocks can move that violently in both directions, it typically means significant volatility will continue." Even if today's rally is well-supported by news flow, it doesn't mean the inherent high volatility of chip stocks has disappeared.
