What Happened?
Shares of analog chipmaker Microchip Technology (NASDAQ: MCHP) jumped 3.4% in the morning session after a wave of optimism swept through the semiconductor industry following a major deal between Samsung, SK Hynix, and OpenAI.
The South Korean chipmakers signed initial agreements to supply advanced memory chips for OpenAI's ambitious Stargate AI data center project. This news sent shares of Samsung and SK Hynix to multiyear highs and boosted positive feelings for chip-related technology stocks globally. The deal was seen as a strong indicator of the massive demand for the infrastructure needed to power next-generation artificial intelligence technologies, lifting investor sentiment for the entire sector.
After the initial pop the shares cooled down to $66.00, up 3% from previous close.
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What Is The Market Telling Us
Microchip Technology’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago when the stock gained 2.5% after a sector-wide rally driven by strong earnings from peer chip designer Broadcom (AVGO). Broadcom, a key player in the semiconductor industry, reported robust earnings and indicated that demand for its AI-focused chips is surpassing expectations. Following the news, Broadcom's shares surged, lifting sentiment across the chip sector. This positive report from an industry peer suggests healthy demand for semiconductor products, particularly those related to artificial intelligence, which benefits other companies in the space like Microchip Technology. The rally was also supported by broader market optimism after a jobs report reinforced investor expectations for a potential interest rate cut.
Microchip Technology is up 16% since the beginning of the year, but at $66.00 per share, it is still trading 16.5% below its 52-week high of $79.05 from October 2024. Investors who bought $1,000 worth of Microchip Technology’s shares 5 years ago would now be looking at an investment worth $1,272.
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