The largest boosts to the chip sector on Thursday came from shares of Nvdia Corp, Advanced Micro Devices, and Micron Technology, which outperformed the general market as investors sought for opportunities to invest in Japan and artificial intelligence.
Synopsys announced higher-than-anticipated third-quarter profit forecasts, claiming growing use of AI and automation benefited its business. Shares of the semiconductor design software company ended the day up 8.7%.
Nvidia's stock experienced a 5.0% increase, and the Philadelphia semiconductor index saw a gain of 3.2%.
Following the company's announcement that it would invest up to 500 billion yen ($3.70 billion) in extreme ultraviolet (EUV) technology in Japan over the following few years with cooperation from the Japanese government, Micron's shares increased by 4.1%.
Ahead of a three-day Group of Seven (G7) summit in Hiroshima, Japan's President Fumio Kishida urged executives from notable companies, including Micron, Intel Corp, and Taiwan Semiconductor, to consider investing in Japan. The summit aims to address concerns about China's economically coercive policies and its acquisition of sensitive technology.
According to Kim Forrest, the chief investment officer at Bokeh Capital Partners in Pittsburgh, the surge in Thursday's market can be attributed to the ongoing investor enthusiasm surrounding the rise of artificial intelligence as the most sought-after technology, rather than the news coming from Japan.
Kim Forrest pointed out that although it is positive to witness collaborative efforts between companies and countries to enhance production capacity, from an investor's perspective, the construction of new plants typically does not yield immediate rewards. This is because a significant portion of the available funds is allocated towards such endeavors, impacting short-term free cash flow.
The money manager, while highlighting positive results from Synopsys as an encouraging sign for the chip sector, acknowledged that investors perceive chips as the accessible component of the AI narrative that they can currently invest in. This is because there isn't a single company that serves as the central player or lynchpin for AI, making chip-related investments more attractive in the present context.
Shares of AMD rose 4.0%, while those of Intel rose 2.8%. On May 24, Nvidia—which has gained 116% so far in 2023—is expected to release its latest quarterly report.
Nvidia shares reached their highest level since December 2021, while Micron shares reached their highest point since June 2022.
In comparison to the chip sector, the S&P 500 technology index experienced a 2.1% increase, while the S&P 500 growth index showed a more modest growth rate of 1.0%.