Chip stocks have been whacked so far this year on inflation fears and concerns that the crisis in Ukraine will add to supply chain challenges. Through Wednesday’s close, the iShares Semiconductor ETF was down 15% in 2022, while the Nasdaq and S&P 500 had dropped 12% and 6.8%, respectively.
Nvidia led the rally on Thursday, climbing about 9%. Earlier this week, Nvidia said at its investor day that the company’s roadmap includes new server chips with an emphasis on artificial intelligence, as well as a plan to build the world’s fastest AI supercomputer.
Analysts liked what they heard.
“Fundamentally we continue to believe Nvidia is uniquely suited to benefit from the growth of AI in hardware and potentially software,” wrote Deutsche Bank’s Ross Seymore, who recommends holding the shares, in a note on Wednesday.
Intel jumped over 6% on Thursday, which would mark its biggest single-day gain in more than year. CEO Pat Gelsinger was on Capitol Hill on Wednesday to make the case that government subsidies for domestic manufacturing would boost American national security and could help fix the current shortage of semiconductors that’s roiling the automotive industry and other key areas of the economy.
“Oil reserves have defined geopolitics for the last five decades,” Gelsinger said in an interview on CNBC. “Where the fabs are for a digital future is more important,” he added, referring to semiconductor plants.
Intel plans to spend at least $20 billion on a chip factory complex in Ohio and this month announced plans to spend $36 billion to build a new “mega factory” in Germany as well as other European hubs.
“Let’s build them where we want them, and define the world that we want to be part of in the U.S. and Europe,” Gelsinger said.
The chip rally was aided by a Labor Department report that showed initial jobless claims last week dropped to the lowest since 1969. Investors snapped up shares of companies poised to benefit from a U.S. economic recovery.