Chip Stocks Surge 60% in 6 Weeks, Retail Investor Influx Raises 'AI Bubble' Concerns

On May 11, as the AI craze continues to boost the semiconductor sector, U.S. chip stocks have surged approximately 60% over the past six weeks. However, several institutions have begun to warn that the market is approaching a ‘parabolic rise’ phase. Meanwhile, a significant amount of previously sidelined retail funds has recently flowed back into technology and chip stocks. According to data from JPMorgan, retail buying power for tech stocks in the U.S. reached its highest level in the past year last week, with AI-related memory chips and hardware companies being the most sought after. Driven by this influx of capital, the majority of SOX component stocks are currently above their 200-day moving average, with some technical indicators even exceeding levels seen during the 1999 internet bubble. Dave Mazza, CEO of Roundhill Financial, stated that the demand for AI infrastructure has indeed been validated during earnings season, but the market is paying increasingly high prices for ‘perfect expectations.’ He warned that the ongoing high-level chasing is bringing the semiconductor market closer to an uncontrollable parabolic trend. Strategas Securities strategist Chris Verrone pointed out that the current rate of increase in the chip sector has reached historically extreme levels, and once the trend reverses, risks could escalate rapidly. Another institutional figure, John Kolovos, noted that the semiconductor index is currently about 57% above its 200-day moving average, a situation that has only occurred similarly in 1995 and 2000, both of which were followed by significant corrections. However, some Wall Street institutions still believe that directly shorting chip stocks carries high risks. Barclays’ strategy chief Alexander Altmann stated that while market sentiment has clearly heated up, there are no signs of a complete loss of control yet, and shorting SMH ‘is almost equivalent to self-sabotage.’