Chip stocks take center stage as markets hit new heights

The stock market's recent upward climb appears heavily reliant on the semiconductor sector, with a handful of chipmakers driving growth. This week, companies like Texas Instruments, AMD, and Intel saw significant gains, pushing major indexes like the S&P 500 and Nasdaq Composite to record intraday peaks. Analysts attribute this rally to strong earnings reports, particularly for chips used in AI and data centers. But is this surge sustainable, or are investors overlooking potential risks? Overbought stocks—those trading at prices higher than their recent averages—dominated the news, with the iShares Semiconductor ETF (SOXX) extending its winning streak to 18 straight sessions. While investors celebrate these gains, some warn that rapid price increases might lead to pullbacks. Technical indicators like the Relative Strength Index (RSI) suggest many chip stocks are overextended, raising questions about how long the good times can last.Outside the chip sector, other industries showed mixed results. Equipment rental giant United Rentals impressed with a sales forecast boost, while pharmaceutical company West Pharmaceutical outperformed earnings expectations. On the flip side, defense stocks like Lockheed Martin and Northrop Grumman stumbled as geopolitical tensions eased. Could defense spending be nearing its peak? Retail troubles added to the week’s drama, with farm supply chain Tractor Supply dropping sharply after weak sales forced analysts to slash their price targets. With consumers cutting back on nonessentials, the company’s future looks uncertain.