Microsoft's AI Bet Fuels Chipmaker Surge
Sign up for ARPU: Stay ahead of the curve on tech business trends.
Shares of chipmakers surged on Monday following Microsoft's announcement of an $80 billion investment in AI-enabled data centers by fiscal 2025, Reuters reports. This move has fueled optimism about continued strong demand for semiconductors.
Micron, a leading memory chip manufacturer, experienced the most significant gains, with a 10.6% increase. Chip-making equipment companies, including Applied Materials, Lam Research, and KLA Corp, also saw substantial gains, ranging from 5.1% to 5.5%.
The Philadelphia Semiconductor Index, which tracks semiconductor stocks, reached its highest point since mid-October, rising by 3.9% on the day. This index has already seen a strong start to the year, jumping over 19% in 2024.
The tech-heavy Nasdaq, a major stock market index, was also boosted by the news, while semiconductor stocks in Europe and South Korea saw similar upward trends.
Citigroup, a major investment bank, described Microsoft's spending plan as a "modest positive" update, noting that it eliminates the risk of a decrease in capital expenditure.
The significant increase in Microsoft's investment in AI data centers is driving the current demand for chips. "AI data centers are very chip hungry, that's why you have people running towards the chip sector right now," said Michael Matousek, head trader at U.S. Global Investors.
Record revenue for Foxconn, a major contract manufacturer, in the fourth quarter, driven by strong demand for AI servers, further contributed to the overall positivity in the chip sector. Nvidia, a leading AI chip manufacturer, saw a 5.1% increase in its stock price. The company's CEO, Jensen Huang, is scheduled to give a keynote speech at the CES trade show later today. Another AI server maker, Super Micro Computer, also saw a significant jump, rising 10.3%.
Nvidia's previous quarterly results signaled a slowdown in revenue growth. However, these concerns were overshadowed by the substantial demand for the company's AI chips, which currently dominate the market.