Nvidia's surge fuels US semiconductor rally, Philadelphia index up 2.3%

The US semiconductor sector experienced a significant rally, led by a nearly 9% surge in artificial intelligence (AI) chip giant Nvidia. The company's stock closed at $227.98, adding approximately $440 billion to its market value in a single day. This powerful performance boosted investor confidence, driving the Philadelphia Semiconductor Index (SOX) up by 2.33% to 11,882.2 points.

Nvidia's impressive gains were attributed to its stronger-than-expected second-quarter earnings and an optimistic growth forecast for fiscal year 2028, projecting a 70% revenue increase. This outlook significantly surpassed Morgan Stanley's estimate of 52% and the market consensus of around 40%. Nvidia CEO Jensen Huang indicated that actual AI chip demand is even higher than projected, with supply constraints, rather than demand, limiting growth.

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Nvidia's results show that the demand for the AI boom is not running out.

Huang emphasized that AI has reached an "inflection point," with a rapidly growing number of companies requiring large-scale graphics processing unit (GPU) clusters. This forecast comes at a time when concerns about the massive capital expenditures by big tech companies on AI and the return on investment were mounting. Rival companies developing their own AI chips and controversies surrounding "circular financing" in AI infrastructure investments had fueled speculation that the AI chip demand might be peaking.

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AI has reached an inflection point.

However, Nvidia's unusually long-term revenue outlook has eased these concerns. Analysts noted that Nvidia's results demonstrate the AI boom's demand is far from exhausted, though achieving this growth will require substantial investment. Potential supply shortages, particularly in memory semiconductors, remain a variable, as Nvidia itself warned. Key partners like TSMC are also facing supply constraints, impacting the availability of AI accelerators.

Despite potential long-term threats from hyperscalers and AI research labs developing custom chips, Nvidia's latest performance and outlook have rekindled expectations for sustained strong demand in the AI semiconductor market, propelling a broad rally across US semiconductor stocks.

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The demand is much larger than 70%.