LIVE MARKETS-Chip stocks powering up on the charts

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CHIP STOCKS POWERING UP ON THE CHARTS

U.S. President Donald Trump's administration plans to rescind and modify a Biden-era rule that curbed the export of sophisticated artificial-intelligence chips, a spokeswoman for the Department of Commerce said on Wednesday.

With this, shares of AI chip darling, Nvidia NVDA.O, whose sales could rise if the rule were changed to increase exports, ended 3% higher after the news came out on Wednesday. On Thursday, it's quoted up more than 1% in premarket trade.

The Philadelphia semiconductor index .SOX, which topped in July of last year, well ahead of the Nasdaq composite's .IXIC November peak, has staged an impressive rally off its early April trough:

Of note, when the SOX topped in July 2024, its relative strength vs the composite (SOX/IXIC ratio) diverged.

More recently, the SOX/IXIC ratio hit a more than three-year low as it bottomed on April 4. Then, despite a lower SOX close two trading days later on April 8, which put that index down nearly 40% from its July 10 record close, the ratio was higher, showing a slight bullish convergence.

With this, the SOX tested, but did not close below, the 61.8% Fibonacci retracement of its October 2022-July 2024 advance.

The SOX finished Wednesday up just over 23% from its April 8 close (the composite has advanced just over 16% from its April 8 close).

Now, the SOX, which ended Wednesday at 4,386.36, is once again at a key juncture as it's attempting to overwhelm the 38.2% Fibonacci retracement of its October 2022-July 2024 advance, which at 4,464.19, is acting as a tough hurdle.

On May 2, the SOX hit a high of 4,430.95 before it backed away. Closing above this level may suggest room for a much greater recovery.

Bulls are also watching to see if the SOX/IXIC ratio can forcefully overwhelm the resistance line from its July peak. Given that chips are often referred to as the "brains" of modern tech, further outperformance on their part may help fuel overall bullish sentiment.

Meanwhile, other chip stock news that may impact Thursday trading:

Infineon IFXGn.DE rises as its lowered FY outlook still in line with expectations.

Intel INTC.O rises on report of foundry chip contract with Microsoft MSFT.O.

ARM ARM.O down after forecasting quarterly revenue below estimates.

(Terence Gabriel)

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