Chip stocks surge 60% in 6 weeks, retail investors flood in at high levels sparking "AI bubble" concerns

Mars Finance News, May 11 — With the AI boom continuing to lift the semiconductor sector, U.S. chip stocks have surged by about 60% over the past six weeks, but multiple institutions have begun warning that the rally is nearing a “parabolic rise” phase. Meanwhile, a large amount of retail money that had previously missed out has recently re-concentrated and flowed back into technology and chip stocks.

According to data from JPMorgan Chase, last week’s retail investors’ buying intensity in U.S. tech stocks rose to the highest level in the past year, with AI-related memory chips and hardware companies being the most sought after. Driven by capital inflows, most components of the SOX are still currently above the 200-day moving average, and some technical indicators have even surpassed levels seen during the 1999 internet bubble.

Roundhill Financial CEO Dave Mazza said that demand for AI infrastructure has indeed been validated during the earnings season, but the market is paying increasingly high prices for “perfect expectations.” He warned that continued chasing at elevated levels is making the semiconductor rally increasingly close to an uncontrollable parabolic trajectory.

Strategas Securities strategist Chris Verrone noted that the current pace of gains in the chip sector has reached historical extreme levels, and once the trend reverses, risks could quickly be amplified. Another institutional figure, John Kolovos, said that the semiconductor index is currently about 57% above its 200-day moving average; historically, only 1995 and 2000 have seen similar situations, and both were followed by clear pullbacks.

However, some Wall Street institutions still believe that directly shorting chip stocks right now is extremely risky. Barclays strategy chief Alexander Altmann said that although market sentiment has clearly warmed up, there are not yet signs of a fully out-of-control situation; at this point, shorting SMH “is almost the same as self-destruction.”