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There are some clues as to the health of the bull market we’ll discuss after a big run up, a huge jump in EPS estimates for 2026, Apple’s role in the AI CAPEX arms race, Bitcoin and more [tap to join us for Opening Playbook]
I was talking with my Opening Playbook co-host, Graham Lindmanearlier about something that’s been on my mind — and honestly, it’s one of the reasons I’m staying directional on semis even when valuations look stretched.
Here’s the thing: Chip stocks have a narrative advantage right now that’s hard to overstate.
It’s not just that they’re in a hot sector. It’s that the market perceives them as making chips for the most important technological shift in our lifetime, and as long as that story holds, traditional metrics like P/E ratios just don’t seem to matter.
Think about it. Companies like Nvidia (NVDA) and Advanced Micro Devices (AMD) aren’t being judged the way you’d judge a typical stock.
The market isn’t asking, “Wait, is this P/E too high relative to growth?” or “Are we getting ahead of ourselves here?” Instead, the conversation is: There’s so much demand we can never keep up — we’re just in inning one.
And in that kind of environment, things can just keep going.
What’s even more interesting is how this momentum creates opportunities within the sector itself. For example, AMD still has legitimate catch-up room relative to names like NVDA and Micron Technology (MU).
Even after a massive run, there’s a sense that a brief pause could easily lead to another concentrated move back to the upside. That intra-sector rotation potential adds another layer to why this group can stay strong longer than traditional models would predict.
Why Chip Stocks Have a Unique Edge
Now compare that to other big AI players. Take Alphabet (GOOG; GOOGL), for example.
Sure, their Gemini bet has done well, but the market still views Google as making multibillion-dollar bets on how to fit into different layers of AI, whether that’s hardware or consumer-facing applications.
Chipmakers, on the other hand, operate with a level of clarity the market loves. They’re not making strategic bets — they’re making chips. One thing.
And demand is overwhelming, so the market can trust them to execute. There’s no ambiguity, no “will this product work?” question — just pure throughput.
That matters more than people realize. It’s part of why narrative insulation around semis is so powerful. This clarity — this single-minded execution — gives them a kind of price momentum sustainability you rarely see elsewhere.
Even if some of the charts look technically stretched, it doesn’t necessarily mean the move is overdone. When you zoom out and look at actual market pacing, the PHLX Semiconductor Index (SOX) is currently at 10,980 — up over 50% for the year and roughly 30% from 12 months ago.
That perspective helps explain why technical overbought signals aren’t scaring anyone away right now.
The Future-Pacing Story
The key phrase I keep coming back to is this: The demand is so future-pacing that no one’s really worried about fundamental values or any of those other concerns.
As long as that holds — as long as the market believes we’re still in the early innings of something massive — it’s hard to imagine a point where everyone suddenly steps back and says, “Wait, we’re getting too far out here?”
That doesn’t mean there aren’t potential catalysts that could cool things off. A flood of big tech and AI-related IPOs could create an air-pocket scenario where the index rips higher on excitement alone.
If that happens and the market shoots up another 15% on IPO enthusiasm, that might finally justify a broader pullback. But absent that kind of distortion, the narrative remains firmly intact.
It’s helpful to remember how other strong narratives have behaved over time. Look at energy — there was a strong thematic setup, a clear picks-and-shovels story, and yet once everyone became aware of it, the juice came out of that trade.
Narratives don’t die quickly, but they do eventually lose momentum once they become too obvious. Right now, semis simply aren’t at that point.
On the trading side, there’s another angle worth keeping in mind. Earnings reactions for these names are often treated like a coin flip, and historically that’s been fairly accurate.
But the interesting part is what happens after. The seven- to eight-day follow-through frequently outperforms the initial move because these stocks are already moving that much on normal days, earnings or not.
That’s a useful edge for traders who understand how narrative trends can carry price action long after the headline fades.
The strength of the demand story also stretches beyond the chipmakers themselves. Some ancillary players have visibility that borders on guaranteed.
One example: Suppliers in the AI infrastructure chain that already have years of orders locked in. When a company knows that 80% of its production for the next five years is spoken for, that kind of certainty reinforces just how expansive this ecosystem is becoming.
So if you’ve been sitting on the sidelines waiting for semis to “make sense” from a valuation perspective, you might be waiting a while.
The market isn’t trading these names on fundamentals right now — it’s trading them on belief in the future. And that belief is still accelerating.
Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Nate Tucci
Tucci Trades
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