June 25, 2025

QuickTakes

Semiconductors Leading

The Stock Market Higher

Since the start of the current bull market during October 2022, we recommended overweighting the S&P 500 Information Technology sector and have been especially positive on the S&P 500 Semiconductor industry. We stuck with that recommendation during the correction in the S&P 500 from February 19 through April 8. In recent days, the industry's stock price index rose to new record highs (chart).

Nvidia's stock price rose more than 4% today. It closed at a record high for the first time since January. Nvidia's current market capitalization is $3.77 trillion. This valuation has made Nvidia the world's most valuable company, surpassing Microsoft ($3.66 trillion) and Apple ($3.01 trillion) (chart). That's an impressive achievement considering that Nvidia CEO Jensen Huang last month said, "The $50 billion China market is effectively closed to US industry." At the company's annual shareholder meeting today, Huang said that AI and robotics are the firm's biggest growth opportunities.

When DeepSeek was released on January 24, investors panicked and sold Nvidia and other chip stocks because they feared that capital spending on AI infrastructure might be cut back. Q1 earnings reports showed that cloud providers like Google, Microsoft, and Amazon remained committed to building more datacenters packed with semiconductors. Indeed, US industrial production of semiconductors continues to soar to record highs (chart).

The same can be said for S&P 500 Semiconductors forward earnings per share, which continued to rise to record highs even during the correction earlier this year (chart).

The industry has an unusually high forward profit margin currently at 39.4% (chart). That's because it is constantly innovating.

By the way, the Nasdaq 100 is also at a record high. We expect that the S&P 500 will be there too before the end of this week. Despite the fireworks in the stock market, the major bull-bear sentiment ratios remain below their averages over time (chart). That suggests more upside for the stock market since many investors remain wary and are not overly bullish.

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