Why the iShares Semiconductor ETF Jumped 40% in April

Shares of iShares Semiconductor ETF (Nasdaq: SOXX) were surging last month as the sector broke out on a number of favorable trends, including cooling tensions in the Middle East, new data center deals, advances from Anthropic, and a strong earnings report from Intel that showed that CPU demand was surging because of Agentic AI. Additionally, other earnings reports confirmed that demand for chips continued to outpace supply due to AI.

As a result, the iShares Semiconductor ETF, which holds many of the top chip stocks, finished the month up 40%, according to data from S&P Global Market Intelligence. As you can see from the chart below, the ETF climbed through nearly the entire month, easily outpacing the S&P 500.

^SPX data by YCharts

Why semiconductor stocks are soaring

Stocks had a stellar month in April, but it was especially impressive for many of the top stocks in the SOXX ETF, which include Nvidia, Broadcom, Micron, and Advanced Micro Devices.

Among the trends last month was strong earnings reports from industry stocks ike Taiwan Semiconductor Manufacturing, NXP Semiconductor and Intel, which more than doubled last month on an earnings report that showed demand for its chips turning the corner, thanks in part to increased demand for CPUs as hyperscalers require more inference to run agentic AI programs.

The AI trade came back in full force as demand for cloud computing capacity materialized, with CoreWeave securing a $21 billion deal to provide AI cloud capacity to Meta Platforms and a deal for an unspecified amount with Anthropic.

Additionally, when the four big hyperscalers reported earnings at the end of the month, three of them said they were raising their capital expenditure forecasts for the year, meaning that semiconductor demand continues to move higher. In fact, Meta said that it was hiking its capex forecast primarily because of higher component prices, showing chip prices continue to move higher.

Image source: Getty Images.

Can semiconductor stocks keep going up?

After last month's surge and a bullish trend during the AI boom, semiconductor stocks are expensive. The SOXX ETF currently trades at a price-to-earnings ratio of 52.3.

That is pricey, but many of its top components are still delivering scorching hot growth, including Micron and Nvidia.

While further gains will have to be earned, there's still potential for the SOXX ETF to move higher, especially considering the momentum in AI right now.

Jeremy Bowman has positions in Advanced Micro Devices, Broadcom, CoreWeave, Meta Platforms, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Intel, Meta Platforms, Micron Technology, NXP Semiconductors, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.