Lynx sees AI semiconductor rally extending into year-end

Investing.com -- AI semiconductor stocks are poised to extend their recent rally into year-end, with Nvidia, Micron Technology and Sandisk among the names expected to lead the move, according to Lynx Equity Strategies analyst KC Rajkumar.

The Philadelphia Semiconductor Index pulled back modestly Wednesday after four consecutive sessions of gains, but Rajkumar said the broader AI semiconductor rally that began following the Federal Reserve’s Sept. 15 meeting remains intact.

The sector has increasingly shrugged off concerns that higher bond yields could derail the rally, Rajkumar said, noting that AI semiconductor stocks are being bought in waves.

Micron was the latest beneficiary, rising roughly 4% Wednesday despite a weaker broader market. Rajkumar noted that the stock broke out of its trading range in early September and has continued to move higher as daily volatility has moderated.

Recent results are also providing investors with new clues on the outlook for memory pricing. Samsung reported preliminary third-quarter operating profit up roughly ninefold year over year, while Micron’s August-quarter operating profit rose about 11%.

Rajkumar said investors are now focused on average selling prices further out, with Micron management indicating that supply-demand conditions in fiscal 2027 and 2028 should be significantly tighter than in fiscal 2026.

Taiwan Semiconductor Manufacturing (NYSE) provided another positive signal, reporting third-quarter revenue growth of 51% year over year, above the high end of its guidance. Rajkumar said the result could push TSMC’s 2026 revenue growth from its guidance of "slightly above 40%" to at least the mid-40% range.

More broadly, Rajkumar said AI semiconductors are emerging from a period of investor skepticism and are no longer the crowded trade they were several months ago. He pointed to the growing popularity of AI agents from Meta, OpenAI and Anthropic, as well as stronger-than-expected AI-driven services at Accenture, as signs that demand for AI applications is broadening.

"Net/net," Rajkumar expects AI semiconductors to "run up into year-end," led by Nvidia, Micron and Sandisk.

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