Chip Stocks Are On Fire — Will It Last?

Prof G Markets - Vox Media Podcast Network

Semiconductor stocks surged in 2026, driven by AI demand and supply bottlenecks, but questions remain about sustainability. Analyst Stacy Razzgon discusses earnings growth, capacity constraints, and the potential for a p

Key takeaways

• AI demand is fueling semiconductor booms

Transcript preview

Megan Rapino here. This week on a touchmore, the beautiful game, I am sitting down with fashion designer, DJ, and the Washington Spirit's first ever creative director, Domo Wells, in her LA studio. We talk about Domo's unusual path towards sports fandom and how her work as a DJ makes her a better designer. And what designing for women's athletes and their fans should actually look like. Check out the latest episode of a touch more, wherever you get your podcast and on YouTube. The money is evil, then that building is hell. The show goes on. The first thing is evil, then that building is hell. The show goes on! The first are never watch the show, sell! the Dow finished its best first half since 2021 and the Russell 2000 wrapped up its best first half since 1991. Meanwhile Brent Crude was roughly flat on the day as investors awaited news from talks in Iran. The yield on 10-year treasuries climbed as job openings data showed a stable labor market and finally Bitcoin dipped below 60,000 dollars once again. Okay. What else is happening? their best quarter ever. The Philadelphia Stock Exchange Semiconductor Index rose 82% in the second quarter and is up 94% so far this year. Western Digital is up 240% year-to-date Micron is up 310%. Sandisk is up more than 700%. But the rally hasn't been entirely smooth. Last week chip stocks fell 8% in their worst week since April 2025. isn't saying that much. Still the stunning run-up and the turbulence along the way leaves investors with one big question and that is how long can this semiconductor boom actually lost. Joining us to help answer that question we are speaking with Stacy Razzgon, senior analyst at Bernstein. Stacy thank you so much for joining us on the show. This has been just a crazy run-up that not many people predicted. I mean AI is winning, but not everyone in AI is winning. Big Tech certainly isn't, but the semiconductor stocks are, we'll get into how sustainable this actually is, but first just your reflections on what's been a crazy quarter. You bet, and I mean, semis have been the primary beneficiary here, and as you said, the Sox index is up almost 100 percent. Actually, may even be 100 percent after today's close year to date. And AI has just gotten so big, it's dragging everything along in the space. thing you would have been just fine. It's interesting though some of the divergences we've seen this way. So the traditional sort of like blind AI winners you would think the invidious and the broad comes of the world that are doing the actual AI accelerators, they've actually had the worst performance. You know, they're up, but they're up not anywhere near as much as the sector. And the reason is people have been playing the so-called bottlenecks. Again, as AI has grown like sort of one area of the space at a time followed by the next, you've been sort of the next, you've been sort of the next, you've been sort of the next, you've been sort of the limits, what they can supply and then prices go up and you know semi investors love to play bottlenecks and so the stocks have gone up and you know we went from the accelerators to to the memory to the semi cap to the optical to the networking to the power semi-s to the CPUs now now people are playing discreet and other things it's really been kind of remarkable overall though you could have owned almost almost anything in the space year today you would have been sitting pretty yeah yeah semiconductors now make up a fifth Yes and P. Is it that much? Wow. Which I just find stunning. 20% of the entire market. I mean when you look at that divergence between sort of the obvious AI names and the less obvious AI names and I think that is a pretty good distinction as to who's been winning in this market and who hasn't at least in 2026. I mean is that just investors speculating having a lot of fun with these more obscure names I mean why are they so about a random name in a bottlenecked up sector versus like, you know, in, in, you know, in video. You know, it really has been about earnings and, for you, even with the space up 100% year to date, you sort of like, decompile it into the drivers, you know, probably 70% plus of that performance has actually been earnings growth. So like multiples in the space are up and I won't say that like the space overall is expensive, but it's not egregious. And by far in a way the much more than the valuations have. And some of these bottlenecks, we've just seen massive revisions. I mean, take memory, for example, I don't cover the memory space, by the way, it's a colleague of mine, but to talk about the industry rather than the stocks. I believe we've just seen some phenomenal positive revisions in the earnings powers. You know, memory prices have just gone through the roof, it's through the roof as supply as the bottlenecks. I think for some of the other ones, there's the hope or the strong belief that numbers as strong as they are right now are just too low given where I demand is growing. And again you can look at semi-cap or maybe some of the optical names or some of the other ones that are playing out right now. You can just look out at where people are forecasting demand to be and you can see where the numbers are sitting right now and it's clear that one of those things is run. Either the demand is not going to be there or numbers broadly probably still need to come up. And that's why you've seen some of these other names respond. And so I don't know that it's necessarily unjustified. Again, I wonder why some of the other compute names haven't performed as well, because the numbers there, I think, are going up too. But I think maybe they're more well known or more heavily anticipated that you will see that kind of performance. And again, it was only so much money to go around, right? Investors have to invest in something. I think there's been a belief among the more traditional that they're safer you can use them as a source of funds in some sense to play some of these more other like esoteric names because you know like numbers at least for the big guys are going to go up anyways that there's less risk from from doing that and so we've just seen some of the fun shift into other areas I think. It seems like one of the most important questions for Samese and therefore for the entire market because they make up a fifth of the entire market is will this lost? which are largely a result of huge demand leading to huge prices. And the question then becomes, is this a one-off? Is this cyclical, which is a big question in the semis business? Or has something fundamentally changed and our earnings just going to skyrocket or at least be at this level forever? What do you think? Probably there's some elements of truth from all of those things. Like, semis I think are cyclical and they always have been and they probably always will be, but there's a variety of different types of cycles of cycles of cycles in different cycles and different you could argue that this cycle has duration. And let's take the memory space, for example. And that's probably one of the areas we've seen the biggest price increases as well, which is driving all this. But the reason is, as you said, demand is very strong and supply is very tight. And, you know, this time is different is always sort of a dangerous statement, but there are some things that are different. Take the D-R-AM space, for example.