5 Signs the Semiconductor Rally Is Getting Silly

Chip stocks have surged on AI-driven demand, with the PHLX Semiconductor Index posting a nearly 54% gain over 25 trading days—its best such run since 2000—while the VanEck Semiconductor ETF (SMH) jumped about 44% over the same span. The sector has materially outperformed the S&P 500 and Dow, and SMH shows technical signs of being extended (RSI at 70 for 17 sessions, ~40% above its 200-day moving average and ~25% above its 50-day). That combination has prompted “bubble watch” comparisons and warnings of elevated downside risk, even as some analysts remain bullish, citing up to $3 trillion of enterprise and government AI spending over the next three years. Market impact: sharp sector leadership has driven broader tech outperformance, raised volatility and pullback risk for chip names, and rekindled comparisons to prior semiconductor bubbles—suggesting investors should weigh stretched technicals against strong fundamental AI demand.