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 Microchip Technology (NASDAQ: MCHP) jumped 3.2%. Is now the time to buy Microchip Technology? Access our full analysis report here, it’s free.
- Analog Semiconductors company onsemi (NASDAQ: ON) jumped 3.5%. Is now the time to buy onsemi? Access our full analysis report here, it’s free.
Zooming In On onsemi (ON)
onsemi’s shares are extremely volatile and have had 30 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 5 days ago when the stock gained 7.3% on the news that semiconductor stocks rebounded amid dip buying following a recent selloff, as reports revealed that China may ease restrictions on advanced Nvidia AI chip imports.
Following sessions of profit-taking that dragged down the entire sector, semiconductor stocks rebounded strongly.
The reversal was triggered by a report from The Information that Chinese authorities recently informed top technology companies, including Alibaba, ByteDance, and DeepSeek, that they may soon receive permission to purchase a limited quantity (capped under 200,000 units) of Nvidia's H200 AI processors for model training. Supporting the improved outlook for chip stocks, reports revealed that SK Hynix's $24.5 billion U.S. ADR offering was oversubscribed by more than seven times, proving that institutional appetite for AI memory chips remains highly robust.
onsemi is up 64.4% since the beginning of the year, but at $93.24 per share, it is still trading 30.4% below its 52-week high of $133.93 from June 2026. Investors who bought $1,000 worth of onsemi’s shares 5 years ago would now be looking at an investment worth $2,476.
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