Semiconductor stocks surge in historic 16-day winning streak amid AI boom

Philadelphia Semiconductor Index Hits Record Winning Streak—But Supply Chain Risks Loom

For a snapshot of renewed investor confidence in AI, look no further than the market's leading chip index.

The Philadelphia Semiconductor Index (SOX), which tracks the world's largest chipmakers, closed out a 16-day winning streak on Wednesday with a 38% surge—and continued climbing on Thursday. The rally marks the index's longest uninterrupted gain in its 32-year history.

The SOX covers the full spectrum of semiconductor firms, from industry giants like Nvidia and Broadcom to chip designers such as Arm Holdings and cutting-edge memory manufacturers like Micron Technology.

In a client note on Thursday, Deutsche Bank highlighted the index's remarkable growth, attributing much of its recent success to Nvidia, whose stock has soared more than 22% over the past 16 days. The latest wave of AI-driven market euphoria has also propelled the Nasdaq Composite to its own historic run, with the tech-heavy index notching its longest winning streak since 1992 last week.

While the rally appears to have room to run, Deutsche Bank analysts warned of a lingering risk tied to geopolitical tensions: disruptions in the helium supply chain.

"Helium is critical for cooling and creating inert, non-reactive environments during chip production, and for some applications, there is no viable substitute," the analysts noted. "With major producer Qatar shipping supplies through the Strait of Hormuz, initial fears of production halts due to Iranian attacks were significant."

They added that the SOX had plunged over 15% at the outbreak of hostilities before reversing course and embarking on its current surge. Though the immediate negative momentum has eased, Deutsche Bank emphasized that the episode underscores the vulnerability of AI supply chains.

Still, the bank's analysts believe the AI trade's strength could persist. Other major financial institutions agree. JPMorgan raised its S&P 500 target this week, citing resharpened AI enthusiasm as a key driver.

"This upswing has been bolstered by strong earnings reports and upbeat forecasts from major industry players, against a backdrop of hyperscaler capital expenditures expected to exceed $700 billion (roughly €597 billion) this year," Deutsche Bank wrote.

The analysts pointed to robust results from Taiwan Semiconductor Manufacturing Company (TSMC) and ASML, highlighting soaring demand for AI chips and manufacturing services. They also noted that United Microelectronics Corporation (UMC), Taiwan's second-largest chipmaker, is poised for strong growth.

"All of this has reinforced the outlook for a strong, AI-driven demand cycle," Deutsche Bank concluded. "For now, last year's debates over an AI bubble have faded, and investors are flocking back to high-beta tech and semiconductor stocks."