UPDATE 1-Chip firms surge on hopes of strong AI-led demand

Adds European chipmakers in paragraph 3, updates prices

By Medha Singh and Purvi Agarwal

Jan 6 (Reuters) - Shares of chipmakers jumped on Monday as Microsoft's MSFT.O plan to invest $80 billion in AI-enabled data centers in fiscal 2025 spurred bets that semiconductor demand would remain strong.

Micron MU.O was the biggest gainer among semiconductor stocks with a 10.6% rise, while chip-making equipment companies like Applied Materials AMAT.O, Lam Research LRCX.O and KLA Corp KLAC.O rose between 5.1% and 5.5%.

The Philadelphia Semiconductor Index .SOX hit its highest since mid-October and was last up 3.9%. The index jumped over 19% in 2024.

The tech-heavy Nasdaq .IXIC led Wall Street's main indexes higher, while semiconductor stocks in Europe and South Korea also surged earlier in the day.

Citigroup said Microsoft's spending plan although in line with analysts' estimates was a "modest positive" update as it removed the risk of a drop in capital expenditure.

"AI data centers are very chip hungry, that's why you have people running towards the chip sector right now," said Michael Matousek, head trader at U.S. Global Investors.

Contract manufacturer Foxconn's 2317.TW record revenue for the fourth quarter on the back of strong demand for AI servers also added to the overall euphoria in the chip sector.

Nvidia NVDA.O, a Foxconn customer, added 5.1%. The AI bellwether's CEO, Jensen Huang, is set to deliver a keynote speech at the CES trade show later in the day. AI server maker Super Micro Computer SMCI.O jumped 10.3%.

Nvidia's quarterly results in November signaled a slowdown in revenue growth but those worries were brushed aside by enormous demand for the company's AI chips, which dominate the market.

(Reporting by Medha Singh and Purvi Agarwal in Bengaluru; Editing by Anil D'Silva)

((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; X, formerly Twitter: @medhasinghs;))