Key Points
The iShares Semiconductor ETF delivered a strong January after a nearly 40% rally in 2025.
The AI buildout continues to boost chip stocks.
However, January's winners were not uniform, as other parts of the sector are now getting a boost besides Nvidia GPUs.
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Shares of the iShares Semiconductor ETF (NASDAQ: SOXX) rallied 12% in January, according to data from S&P Global Market Intelligence.
The SOXX provides diversified exposure to the semiconductor sector, with 30 names in a modified weighting scheme, and no stock exceeding 8% at the start of each rebalancing period. Moreover, this ETF excludes companies domiciled outside the United States, such as sector heavyweights Taiwan Semiconductor (NYSE: TSM) and ASML Holdings (NASDAQ: ASML).
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And yet, it was likely the earnings results from TSMC and its capital-spending projections, along with skyrocketing memory prices, that drove this outperforming sector even higher.
Memory prices and CPUs join the AI party
The first two years of the artificial intelligence boom mainly came from AI GPUs made by Nvidia (NASDAQ: NVDA). And while it appears that GPUs are still in short supply, sometime late last year, the memory and storage sector experienced its own boom, along with traditional CPUs.
The move likely has to do with the AI buildout migrating from the training stage to deploying more infrastructure for inference, which is essentially the use of AI models in everyday tasks. That appears to have reignited demand for traditional DRAM, NAND flash, and hard disk drives for local storage, as well as for enterprise CPUs to deploy the models, orchestrate traffic, and enable machines to talk to one another.
During the quarter, forecasts for both DRAM and NAND flash pricing skyrocketed. In fact, the price of traditional DRAM is expected to increase by 90% to 95% compared with the prior quarter, while NAND flash is projected to surge by 55% to 60%, according to Trendforce.
Thus, it's no wonder that memory giant Micron (NASDAQ: MU), now the ETF's largest weighting, rallied 45.6% in January.
But the demand surge isn't just happening with memory chips. It appears the massive AI capital-spending cycle continues to lift all boats. While TSMC isn't part of the overall ETF, the company reported blowout earnings and forecast massive capital spending of $52 billion to $56 billion in 2026, up 40% from 2025.
The massive spending increase for TSMC, along with huge increases in memory prices, caused semiconductor equipment companies to rally as well.
The outsize gains from Micron and the semicaps were enough to offset rather middling January performances from the large weightings of Nvidia (NASDAQ: NVDA), which rose just 2.5%, and Broadcom (NASDAQ: AVGO), which actually declined 4.3% during the month.
Image source: Getty Images.
Turbulence in February
After the strong January, the SOXX is down 4.6% this month as of this writing. The decline is likely due to investors taking profits following Advanced Micro Devices (NASDAQ: AMD) earnings, during which management provided guidance that may have fallen short of investors' high expectations.
Still, AMD's underwhelming forecast appears to be a supply problem, not a demand problem. Meanwhile, the capital spending forecasts from the major cloud companies this earnings season have come in far higher than investors expected, suggesting the AI infrastructure buildout is set for another strong year of growth in 2026. Whether that continues beyond 2026 is anyone's guess, but as of now, the most intelligent people in the tech sector see AI as a long-term, transformational technology. If that remains true, semiconductor stocks should continue to broadly benefit.
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Billy Duberstein and/or his clients have positions in ASML, Broadcom, Micron Technology, and Taiwan Semiconductor Manufacturing and has the following options: short January 2027 $195 calls on Micron Technology. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Micron Technology, Nvidia, Taiwan Semiconductor Manufacturing, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
