Chipmaking stocks rallied to kick off 2026 as investors piled into the artificial intelligence sector following another year of strong gains. Micron Technology and Dutch chip equipment maker ASML jumped 10 percent and 9 percent respectively to start the new trading year.
Lam Research and Intel rallied more than 6 percent each while Marvell Technology rose 5 percent. Advanced Micro Devices and Nvidia gained about 4 percent and 1 percent respectively. The moves lifted the VanEck Semiconductor ETF approximately 4 percent, building on a nearly 49 percent rally in 2025.
The sector has rallied for three straight years with the ETF posting its best performance ever in 2023 when it gained more than 72 percent. The sustained momentum reflects continued optimism around AI infrastructure spending as hyperscalers invested heavily to meet massive datacenter demand.
Micron led Friday's gains following a Bernstein analyst upgrade. Mark Li hiked his price target 20 percent, pointing to AI-fueled memory demand as a key catalyst. Most of Micron Technology's revenue comes from DRAM and NAND memory products essential for AI workloads.
The rally comes as Bank of America analyst Vivek Arya forecasts global semiconductor sales will surge 30 percent year-over-year in 2026, finally pushing the sector past the historic one trillion dollar annual sales milestone. Arya described the industry as being at the midpoint of a decade-long AI transformation.
Arya highlighted six stocks as top picks for 2026 based on dominant market shares. Beyond Nvidia and Broadcom, he selected Lam Research, KLA, Analog Devices, and Cadence Design Systems. These companies typically maintain market shares between 70 and 75 percent in their respective niches.
Futurum Group CEO Daniel Newman said the AI trade is entering a decisive phase as real-world chip capacity begins driving market gains rather than hype. Newman pointed to overwhelming demand for AI hardware with the limiting factor being the market's ability to deliver at scale.
Several tailwinds support the rally according to Newman. Strong demand signals from China, expansion plans at Taiwan Semiconductor Manufacturing, and rising sales of ASML's advanced extreme ultraviolet lithography machines suggest the industry is laying groundwork for the next AI-driven growth wave.
The combination of expanding foundry capacity, more chipmaking tools, and improved supply chain visibility appears critical to sustaining momentum. However, Newman cautioned that continued gains ultimately depend on whether the industry can scale production fast enough to meet demand.
Investors have raised concerns about a potential AI bubble in recent months as the sector continues growing at a breakneck pace. Michael Burry of "Big Short" fame revealed a short position in Nvidia and AI winner Palantir in November, later blasting hyperscalers for artificially boosting earnings.
Despite skepticism, the opening day rally demonstrates continued investor appetite for semiconductor exposure. The sector faces a critical year proving it can translate massive infrastructure investments into sustainable revenue growth and profitability.
Intel's 86 percent rally in 2025 still lags peers like Nvidia and AMD, which gained 39.7 percent and 132 percent respectively. The gap creates potential upside if Intel executes on its Nvidia co-development agreement for custom data center and PC chips.
The divergence in trading reflected broader market uncertainty as the S&P 500 rose just 0.3 percent and the Nasdaq gained 0.6 percent. While broad indexes traded in tight ranges, semiconductor stocks demonstrated clear momentum entering the new year.
