Let The Chips Fall Where They May?

Samantha Subin of CNBC reports Wall Street sees ‘changing of the guard in AI’ as Intel, AMD shares soar while Nvidia lags: 

Since the launch of ChatGPT in late 2022 and the start of the generative AI craze, one name has dominated the infrastructure boom: Nvidia.

While the chipmaker — and the world’s most valuable company — continues to prosper and is expected to show revenue growth of 70% this fiscal year, Wall Street has moved elsewhere, piling into businesses that were hardly visible in the initial years of the artificial intelligence buildout.

This week offered the starkest illustration yet of what Mizuho analyst Jordan Klein said could be a “changing of the guard in AI.” Chipmakers Advanced Micro Devices and Intel notched gains of about 25%, while memory maker Micron jumped more than 37% and fiber-optic cable maker Corning climbed about 18%.

All four of those companies have more than doubled in value this year, with Intel leading the way, up well over 200%. Nvidia, meanwhile, is only slightly ahead of the Nasdaq in 2026, gaining 15% for the year, aided by an 8% rally this week.

In spreading the wealth to a wider swath of hardware companies, investors are clearly betting that the bull market in AI has long legs and that data centers are going to need a wider array of advanced components for years to come. Memory has been the biggest theme of late due to a global shortage that’s driven up prices and turned Micron, a 47-year-old company tucked in a sleepy corner of the semiconductor market, into one of the hottest trades over the past 12 months.

Micron blew past an $800 billion market capitalization for the first time this week, and the stock is now up over 750% in the past year. CEO Sanjay Mehrotra told CNBC in March that key customers are only getting “50% to two-thirds of their requirements” because of supply issues. 

The memory market is largely dominated by Micron, along with Korea-based Samsung and SK Hynix, which are also both in the midst of historic rallies.

“That is what happens when a market quickly enters a material shortage condition and pricing surges higher” while expenses “rise only modestly,” Mizuho’s Klein wrote in a note to clients early in the week. “You make a lot of money being overweight historic memory upturns when new capacity cannot be added fast enough. That simple.”

Agents drive ‘tremendous demand’

Beyond memory is insatiable demand for central processing units (CPUs), which underpin everyday computers and smartphones. They had mostly become an afterthought as model developers like OpenAI and Anthropic and cloud giants Google, Microsoft and Amazon were gobbling up Nvidia’s GPUs.

Now CPUs are back in the spotlight as momentum shifts from chatbots to AI agents. Bank of America estimates the data center CPU market could more than double from $27 billion in 2025 to $60 billion in 2030.

AMD’s quarterly results this week underscored the emerging trend, as earnings, revenue and guidance sailed past estimates on strong data center growth. The company has long led the CPU charge, and CEO Lisa Su said on the earnings call that AMD now expects 35% growth over the next three to five years in the server CPU market, up from a forecast of 18% growth that the company provided in November.

“Agents are really driving tremendous demand in the overall AI adoption cycle, and we’re very excited to be in the middle of it,” Su told CNBC’s “Squawk on the Street” on Wednesday, following the company’s earnings report.

Analysts at Goldman Sachs and Bernstein upgraded the stock to buy ratings, citing CPU tailwinds. And JPMorgan Chase analysts said the report “crystallizes the structural inflection underway across both server CPU and [datacenter] accelerator growth trajectories.”

Intel, which for many years towered over AMD in the CPU market before missing out on numerous major transitions, most notably AI, is in the midst of a revival sparked by a major investment from the U.S. government last year.

Intel’s stock had its best month on record in April, more than doubling, and has continued notching massive gains, rising 33% in the early days of May. The shares surged 13% on Tuesday following a Bloomberg report that Apple is in talks with Intel and Samsung to produce the main processors for its U.S. devices. They climbed another 14% on Friday after the Wall Street Journal reported that Intel and Apple have come to an agreement for the chipmaker to manufacture some processors for Apple devices.

Representatives from Intel and Apple declined to comment.

Elsewhere in the new AI stack, some companies are directly benefiting from partnerships with Nvidia.

Glass maker Corning, which celebrated its 175th anniversary this week, signed a massive deal with Nvidia on Wednesday that involves the development of three new U.S. factories dedicated entirely to optical technologies for the chip giant.

The deal gives Nvidia the right to invest up to $3.2 billion in Corning, and is likely a major step in Nvidia’s move away from copper cables and towards fiber-optic cables as it builds out its rack-scale systems. Earlier this year, Corning inked a $6 billion deal with Meta through 2030 to provide fiber-optic cables in the social media company’s AI data centers. 

“We’re going to scale up optical at a scale that, quite frankly, no optical companies have ever enjoyed,” Nvidia CEO Jensen Huang told CNBC’s Jim Cramer on Thursday. He said the economy is going through the “single largest infrastructure buildout in human history.” 

Corning’s recent boom on Wall Street pushed its stock to a record in February, when it finally passed its prior high from the dot-com era in 2000. It’s continued to soar in the months since.

Analysts are seeing plenty of other comparisons to the internet boom of the late 1990s, which preceded an extended market bust.

Jonathan Krinksy, an analyst at BTIG, said in a recent note that the magnitude of the markup in the semiconductor space resembles 1999. He warned of a 25% to 30% correction for the PHLX Semiconductor Index, a significant benchmark for the sector, which is up 66% so far this year.

“We have written ad nauseam about how extreme the move in semis has been — in many cases not seen since the dot-com bubble,” he said. “In some ways, however, this move is actually more extreme.”

Last week, I discussed how stocks knocked it out of the park in April, led by red-hot chip stocks.

This week, semis are melting up again led by Micron, AMD, Intel and Qualcomm:

The melt-up in some chip stocks is staggering, even more so than 1999-2000.

They're way overbought but continue to melt up in a parabolic fashion.

For example, Micron shares are up 38% this week, 84% over the past month and 777% over the past year.

So what? Sandisk shares are up 4,162% over the past year, trouncing every other stock. 

 Gamma hedging and one-day options are undoubtedly fuelling these explosive moves but it's more than this; clearly, CTAs/ large quant funds are running the show, increasing their positions in chip stocks with every new high.  

How much higher can chip stocks fly? Nobody has a clue but Sandisk's 4,000%+ return over this past year after it IPOed sends a chill down the spine of short sellers.

Things are way overheated but this May melt-up can continue. 

Still, semis are due for a pause and pullback so chase them at your own risk here.

Below, the CNBC Investment Committee debate whether AI stocks can carry the market and how you should position your portfolio in this environment.

And Paul Tudor Jones, Tudor Investment Corporation founder and CIO and Robin Hood Foundation founder and board member, joins 'Squawk Box' to discuss the promise and perils of AI, future of AI regulation, state of the AI boom, latest market trends, the Fed's interest rate outlook, NY's wealth tax proposal, and more.