Semiconductors Leading Nasdaq's Bounce-Back: ETFs in Focus

U.S. stocks witnessed a bloodbath earlier this month following President Donald Trump’s announcement of sweeping 10% tariffs on all U.S. trading partners, with even steeper levies for countries running trade deficits with the United States. The news rattled investors, causing corrections and bear markets for key U.S. equity indexes. The Nasdaq entered the bear market territory last week.

Against this backdrop, in a surprising development in the tariff saga, Trump announced on April 9 a temporary reduction in tariff rates for most countries to 10% for 90 days, triggering a historic surge across U.S. markets.

As a result, the S&P 500 surged over 9%, marking its third-largest single-day gain since World War II. The Dow posted its strongest percentage gain since March 2020, and the Nasdaq Composite experienced its best single-day performance since January 2001 — its second-best on record. The Nasdaq-100-based exchange-traded fund (ETF) – Invesco QQQ Trust, Series 1 QQQ – added about 12% on April 9, 2025.

Semiconductors Leading the Nasdaq-100 Rebound

While almost all components of the Nasdaq-100 soared on April 9, many surging by about double digits, semiconductor stocks deserve special mention. Six of the top eight performers of the index were semiconductor stocks. VanEck Semiconductor ETF SMH advanced 17.2% on April 9, 2025.

The top-performing chip stocks of the Nasdaq-100 on April 9 were Microchip Technology Inc MCHP (up 27.1%), Arm Holdings PLC ARM (up 24.8%), Advanced Micro Devices Inc AMD (up 23.8%), ON Semiconductor Corp ON (up 22.7%), Marvell Technology Inc MRVL (up 21.9%) and NXP Semiconductors NV NXPI (up 21.1%).

The AI Model Competition Intensifies

Many companies are increasingly showcasing their AI product roadmaps, which is helping the chip stocks. OpenAI, the creator of ChatGPT, was valued at $300 million in a new $40 billion fundraising round led by SoftBank. This funding is a positive development for infrastructure AI stocks, as OpenAI now has significant capital for future data center expansions.

Investors should be alert to the growing competition in AI models. OpenAI's CEO, Sam Altman, announced on April 4 that GPT-5 is set to launch in "a few months," with improvements that surpass initial expectations.

Meta's Llama 4 AI Launch

On April 5, Meta unveiled the first version of its open-source Llama 4 AI model family. The most powerful Llama 4 model, Llama 4 Behemoth, is still under development.

Other Key Players in AI Models

Google recently released Gemini 2.5, and Anthropic continues to enhance its Claude AI models. Elon Musk's xAI startup introduced its Grok models, while China-based DeepSeek is preparing the next version of its controversial open-source models. Across the board, these AI models are competing in reasoning abilities, performance benchmarks, and computing power needs.

The growing U.S.-China competition in AI is also worth monitoring, with DeepSeek's developments attracting significant attention.

NVIDIA’s AI Roadmap and Challenges

NVIDIA NVDA, the leading semiconductor company in the AI stock market, hosted its GTC Conference in March. However, its stock has dropped 17% in 2025. A major concern for NVIDIA is the margin pressure as it scales up production of the next-gen Blackwell AI chips in 2025.

Any Wall of Worry?

In 2023 and 2024, semiconductor stocks outperformed software companies, but in 2025, investor interest in data center infrastructure stocks has cooled. AI stocks are now under closer scrutiny, as market participants are measuring the gap between investments and revenue generation.

If this was not enough, the United States is tightening restrictions on semiconductor exports to China, targeting high-performance chips that power AI systems and advanced computing.

Bottom Line

Despite some pain points, intensive developments in the AI field have kept the semiconductor space charged-up. The recent valuation correction has proved to be a plus. Investing in semiconductor ETFs like SMH, iShares Semiconductor ETF SOXX, SPDR S&P Semiconductor ETF XSD, Invesco Semiconductors ETF PSI and Invesco Semiconductors ETF SOXQ could be gainful if there is a continued market recovery.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research