Shares of the iShares Semiconductor ETF (SOXX +2.18%) were moving higher last month, continuing a long winning streak for semiconductor stocks.
The sector bounced higher in the middle of the month as investors responded to the positive reviews of Meta Platforms' new Muse AI personal agent, which could herald a new era for AI as personal agents gain adoption.
If Muse and peers like Instinct are the next chatbots, then it will drive another wave of demand for CPU, memory, and other semiconductor components.
That news helped push the ETF up 11%, according to S&P Global Market Intelligence.
As you can see from the chart below, much of the gains came in the middle of the month as the Muse news drove the sector higher.
Chip stocks rally again
Nearly all of the top chip stocks were winners last month, benefiting from the Meta news.
The SOXX's top five holdings include Nvidia, Micron, AMD, Broadcom, and Intel. Three of those stocks were up double digits, with Intel gaining 34%, AMD up 30%, and Micron climbing 11%. Meanwhile, Broadcom fell 5%, and Nvidia gained 3%. That makes sense since AMD and Intel are both CPU makers, and therefore have the most exposure to agentic AI. Broadcom and Nvidia have limited direct exposure to products like Muse.
Elsewhere, the Federal Reserve raised interest rates by 25 basis points. Higher interest rates tend to pressure growth stocks like semiconductors, but the sector was able to continue to rise.
Concerns about AI safety aired by Anthropic CEO Dario Amodei and others also failed to derail the rally. Towards the end of the month, the top AI leaders met at the White House with President Trump to discuss safety issues, though no meaningful regulation came out of the meeting.
Image source: Getty Images.
What's next for the SOXX
We're just two days into October, and the SOXX is already up 3.6% for the month. Chip stocks jumped Thursday after a strong earnings report from Micron, which said that tight supply conditions in memory would last at least into 2028, showing the AI boom would continue.
On Friday, stocks jumped on a cooler-than-expected employment report, which makes an interest rate hike less likely when the Fed meets at the end of the month. Though it may seem counterintuitive for stocks to rise on weak job growth, investors are more concerned about the impact of interest rates, at least until there are clear signs of an economic slowdown.
The SOXX now trades at a price-to-earnings ratio of 43, which is expensive, but seems justified by the booming growth in the sector.
