Semiconductor stocks haven’t been this hot since the dot-com bubble — and it could end badly

The SOX rocks!

The Philadelphia Semiconductor Sector Index (^SOX) — better known among traders as the SOX — has surged 30% in the past 13 days. That marks the largest rally of this kind since 2002, BTIG chief market technician Jonathan Krinsky pointed out. The last and only time the SOX saw a similar move into a new high was March 2000, at the peak of the dot-com bubble.

The SOX is more than 16% above its 50-day moving average and at a 52-week high, which is a warning flag, Krinsky said. His work shows that the SOX has been negative 85% of the time five days later, with a median return of -3.64% following this signal.

The Philadelphia Semiconductor Sector Index is a capitalization-weighted index composed of the 30 largest US companies involved in the design, distribution, manufacture, and sale of semiconductors.

It’s dominated by a few megacap names that serve as the foundation for the global artificial intelligence build-out. The four largest weightings in the index, from highest to lowest, are Nvidia (NVDA), Broadcom (AVGO), Micron (MU), and AMD (AMD).

These four chips have seen their stocks surge in April. Memory chip player Micron has gained 41%, Broadcom is up 38%, AMD is up 242%, and Nvidia has tacked on 22%.

Besides pure momentum, the sector has recently gotten a jolt of good news.

Taiwan Semiconductor Manufacturing Company (TSM) delivered an impressive start to the year despite war-related uncertainty.

First quarter revenue surged 35% year over year to a record 1.134 trillion New Taiwan dollars (about $35.6 billion). This marked the first time the foundry giant’s quarterly sales had crossed the trillion-dollar threshold in local currency. Results significantly surpassed the high end of its own previous guidance.

Sales in March jumped 45% to roughly $13 billion, hinting that the AI supercycle is entering an even higher gear.

TSMC shares are up 17% in April.

“We are seeing no cracks in AI demand on the chips/hardware or software front which gives us a bright green light to own the core tech winners heading into 1Q earnings season,” Wedbush tech analyst Dan Ives said in a note.

StockStory aims to help individual investors beat the market.

Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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