Wall Street flees software plays for triple-digit chipmaker boom

Software used to be the safe bet in artificial intelligence. Buy the companies writing the code, sit back, and let subscription revenue do the work.

That trade has come undone. While the iShares Expanded Tech-Software Sector ETF sits about 20% below its record high, the chipmakers building the AI data centers are having one of the best stretches in stock market history.

Micron, Intel, and Advanced Micro Devices all posted gains north of 100% in the second quarter. 

In addition to an expanding earnings base, investors are chasing order books and a supply squeeze that executives say could last years.

Why money is leaving software for silicon

The shift comes down to a simple idea on Wall Street. Everyone building AI needs the same scarce ingredients, and chipmakers are benefiting from a surplus of demand. 

Barclays analyst Anshul Gupta summed it up in a note published Tuesday, June 30, writing that the rotation out of AI hyperscalers and into AI enablers has pushed investor enthusiasm into semiconductors, fueling dramatic rallies, according to CNBC.

Micron (MU), Intel (INTC), and AMD (AMD) gained a combined $2 trillion in market value during the quarter and now rank among the 10th, 11th, and 12th-most valuable technology companies in the country, CNBC reported.

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That's a remarkable jump for three companies that spent years trading in Nvidia's shadow.

Even Nvidia, the biggest AI chip name by far, only gained 15% in the quarter, a modest number by comparison.

Its customers had a mixed few months, too, with Meta stock slipping almost 2% while Alphabet climbed 24%, CNBC noted.

Micron, Intel, AM: the numbers behind the rally

• Micron stock more than tripled in Q2, adding $920 billion in market cap. 
• The company's revenue more than quadrupled as memory prices spiked, and gross margin jumped to 84.9% from just 39% a year earlier.
• Intel stock surged 216% in the June quarter, adding roughly $480 billion in value as the company benefited from renewed CPU demand alongside its U.S. factory buildout. 
• AMD added about $615 billion after nearly tripling, helped by soaring demand for its server processors.
• Networking chipmaker Marvell climbed about 200%, and Arm, which licenses chip designs, rose 134%. 
• The broader VanEck Semiconductor ETF gained 71% in the quarter, its best three months since the fund launched in 2000. 
  Source: CNBC

Micron CFO Mark Murphy told analysts on the company's June 24 call that free cash flow is expected to top $30 billion next quarter, with essentially all of it returned to shareholders through buybacks and dividends. 

"We're really pleased with the financial trajectory of the business," Murphy said. "The combination of memory being so important to so many markets, AI data center, the edge, enabling this or helping enable this technology revolution we have underway."

Chief Business Officer Sumit Sadana said demand for high-bandwidth memory chips remains well above what Micron can supply through 2027 and even 2028, with the HBM market expected to top $100 billion in 2027.

Related: Micron just dethroned Nvidia in one key way

Over at Intel, CFO David Zinsner described a cultural overhaul under CEO Lip-Bu Tan that cut management layers and refocused the company on execution, telling a Bank of America conference the CPU market opportunity could reach $200 billion. 

AMD's Jean Hu pointed to similar strength, noting that CPU revenue grew more than 50% last quarter and is guided to grow more than 70% this quarter as agentic AI workloads drive demand for higher-core-count chips.

For now, the message from chip executives hasn't changed. Supply is tight, customers are locking in multi-year agreements, and nobody on those earnings calls sounded like they expect the shortage to ease anytime soon.

Intel is among the top-performing stocks in 2026.

Cheng Xin&solGetty Images

Is there more upside left for chip stocks?

Out of the 30 analysts covering Micron stock, 29 recommend “buy” and one recommends “hold.” The average Micron stock price target is $1,564, indicating 52% upside from current levels. 

Out of the 35 analysts covering AMD stock, 28 recommend “buy” and seven recommend “hold.” The average AMD stock price target is $510, indicating a 6% downside from current levels. 

Out of the 39 analysts covering Intel stock, 11 recommend “buy,” 26 recommend “hold,” and two recommend “sell.” The average INTC stock price target is $97, indicating a 24% downside from current levels. 

Related: Market rebukes Mag7 stocks, hyperscalers as Micron brags on margins