What Happened?
A number of stocks jumped in the afternoon session after risk-on sentiment returned on Iran peace progress as Treasury yields cooled.
Analog chips (Texas Instruments, Analog Devices, NXP, ON Semi, Microchip) are the workhorse semiconductors inside cars, industrial machinery, medical devices, and consumer electronics. They're tied to broad industrial and auto production, both of which rallied during the day.
Analog chip companies have been working through a two-year inventory correction, where customers like auto OEMs and industrial equipment makers over-ordered during the pandemic and have been drawing down ever since. When the economic outlook improves: Dow at 50,700, yields cooling, peace progress on the table, customers shift from drawing down inventory to placing fresh orders. That's the moment the cycle turns.
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 NXP Semiconductors (NASDAQ: NXPI) jumped 4.9%. Is now the time to buy NXP Semiconductors? Access our full analysis report here, it’s free.
- Analog Semiconductors company Himax (NASDAQ: HIMX) jumped 5.2%. Is now the time to buy Himax? Access our full analysis report here, it’s free.
Zooming In On Himax (HIMX)
Himax’s shares are extremely volatile and have had 37 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 about 23 hours ago when the stock gained 5.7% on the news that AI chip leader Nvidia reported record sales and income, driven by what its CEO described as 'parabolic' demand for AI infrastructure.
The strong results confirmed investors' belief in a sustained AI-driven boom, lifting the entire semiconductor sector. Nvidia's success signals a massive buildout of data centers, which require a vast supply of high-performance chips. This directly benefits memory chip manufacturers like Samsung and SK Hynix, which produce essential components like High Bandwidth Memory (HBM). The intense demand has led some analysts to declare a 'semiconductor supercycle,' a prolonged period of above-average growth for the industry, as companies worldwide race to develop their AI capabilities.
Himax is up 147% since the beginning of the year, and at $21.09 per share, has set a new 52-week high. Investors who bought $1,000 worth of Himax’s shares 5 years ago would now be looking at an investment worth $1,836.
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