What Happened?

A number of stocks jumped in the afternoon session after a cooler-than-expected June inflation report and a surprise capital expenditure warning from IBM appeared to validate AI hardware demand. 

June core CPI printed flat month-over-month (2.6% year-over-year versus a 2.9% forecast), reopening the door to a friendlier interest rate environment. Also, IBM CEO Arvind Krishna revealed in a letter that IBM's second-quarter revenue missed expectations because clients abruptly shifted their enterprise budgets toward servers, storage, and memory to secure supply-constrained AI infrastructure ahead of expected price hikes. 

The combination of a macro tailwind and a fundamental read-through provided a strong setup for chip stocks. The soft inflation print lowers the discount rate, which benefits high-multiple semiconductor valuations. More importantly, IBM's warning acts as direct confirmation that AI infrastructure spending is not slowing down. Instead, it suggests that hardware purchases are actively crowding out enterprise software budgets. 

The specific mention of "memory" purchases by IBM's CEO likely explains the outsized reaction in Micron and SanDisk. While geopolitical risks remain elevated following renewed U.S.-Iran conflict, the market appears to be treating the IBM commentary as a strong fundamental signal ahead of Taiwan Semiconductor Manufacturing Company's (TSMC) earnings later in the week. 

Adding to the optimism, several companies announced significant capital investments to expand manufacturing capacity for advanced chips. Driven by the explosive growth in artificial intelligence and high-performance computing, chipmakers are scaling up their operations. Intel announced a €5 billion ($5.7 billion) investment in its Ireland facility to boost production of its Xeon 6 processors. Similarly, Tower Semiconductor is expanding its 300mm manufacturing capabilities in Japan with government support to meet long-term customer demand.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Analog Semiconductors company Monolithic Power Systems (NASDAQ: MPWR) jumped 7.1%. Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company Amkor (NASDAQ: AMKR) jumped 5.1%. Is now the time to buy Amkor? Access our full analysis report here, it’s free.

Zooming In On Monolithic Power Systems (MPWR)

Monolithic Power Systems’s shares are very volatile and have had 28 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 8 days ago when the stock gained 5.6% on the news that the semiconductor sector continued to rebound from the previous week's sharp selloff amid bullish Wall Street updates. 

Broadcom (AVGO) gained about 4.2% after it disclosed in an 8-K that it signed multi-year agreements with Apple through 2031 to supply custom ASIC silicon. Separately, bullish memory notes landed: UBS raised its Q3 DDR contract-pricing forecast to +32% quarter-on-quarter (from +17%) and reiterated DRAM undersupply "until at least 2Q28"; 

Citi added an upside catalyst watch on Micron; and BofA reiterated Buy ($1,550), arguing memory is "roughly 35-40% of cloud AI capex… yet memory stocks trade at sub-par 10x forward PE." Goldman's trading desk flagged an oversold buy-the-dip setup after momentum factors fell 24% from their peak, the largest drawdown since Q1 2023. 

This was a sector recovery on top of a technical bounce and cheaper oil after OPEC+ lifted output. Two events reinforced it as SK Hynix's ~$28bn Nasdaq listing the previous week and Samsung's earnings later in the week kept the "memory super-cycle" story in the headlines.

Monolithic Power Systems is up 46.9% since the beginning of the year, but at $1,376 per share, it is still trading 18.6% below its 52-week high of $1,690 from June 2026. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $3,593.

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