Chip Stocks’ Record Rally Intensifies AI Bubble Debate

The semiconductor sector’s record-setting surge is heightening debate over an artificial-intelligence bubble, as the Philadelphia Semiconductor Index soared 69% in two months through late May. Chips are the top-performing S&P 500 group in 2026, with memory makers driving the most extreme gains. Micron Technology has more than tripled, while SK Hynix and Samsung each surged over 160%, pushing their combined market value above $2 trillion. Bullish investors point to structural shifts from high-bandwidth memory demand for AI data centers, which is straining production capacity. Profit projections underscore the frenzy: Micron’s net income is seen jumping to $66.8 billion in 2026 and nearly $120 billion in 2027, exceeding Amazon’s expected earnings. Yet bears warn of cyclical risks, noting the semiconductor index trades at 15 times sales, the highest since 2002, while trailing earnings multiples reflect boom-era pricing. The spending backing the boom remains robust, with Amazon, Meta, Alphabet and Microsoft planning up to $725 billion in 2026 capital expenditures, mostly for AI infrastructure. But some wealth managers caution that plateauing demand or debt-fueled overspending could trigger a bust reminiscent of prior memory cycles.