Traders mopped up semicoductor stocks and chipmakers again on Tuesday, as valuations became attractive for AI bulls after they suffered through the worst trading week in over a year.
Semis are extending gains after a highly volatile week, which lowered their valuations; shares of Micron Technology Inc. rose up to 7.5% to $933.50, Advanced Micro Devices Inc. rose 5% to $522.44 , Nvidia Corp was up 2% to $208, American Depositary Receipts of Korean giant SK Hynix surged over 9% to $162.51. Intel Corp surged 5% higher to $104.19
The rally in turn lifted the tech heavy Nasdaq Composite index, which rose nearly 1% to 25,717.30 shortly after the opening bell. S&P 500 rose 0.52% to 7,482.31, and the Dow Jones Industrial Average was up 0.43% to 52,063.44.
"This looks more like a relief rally than the start of a fresh uptrend. Semiconductor stocks had corrected sharply after an exceptional run, leaving positioning stretched and creating room for short covering and selective value buying," said Harshal Dasani, Business Head at INVAsset PMS.
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MU has plunged over 12% in the last week alone after traders engaged in heavy dumping of AI-linked chipmakers and semis on high-valuation concerns. AMD had declined over 8% in the same duration, SK Hynix ADRs have slumped 16.31%.
Going ahead, the next leg of earnings and company forecast is likely to drive investor sentiment. "Markets need evidence that AI infrastructure spending remains intact and that elevated capital expenditure is translating into sustainable revenue and profit growth," added Dasani.
In the long-term semiconductor cycle remains constructive because demand for AI computing, advanced chips and data centre infrastructure continues to expand.
The rally, therefore, presents to be a healthy reset after an overheated phase rather than confirmation that the sector has entered a new sustained uptrend, as per the market expert.
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