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“People talk about AI reducing jobs – complete nonsense. It’s causing more software engineers to be hired.” – Jensen Huang
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It’s a new month, but the market rally continues to roll on. S&P 500 futures are priced to open 0.2% higher, while the Nasdaq is fractionally higher. Treasury yields are unchanged right around 4.45% while crude oil trades back above $90, as there don’t seem to be any signs of an imminent peace deal or ceasefire. Gold prices are down 1.4% but still above $4,500 per ounce, while weakness in Bitcoin persists as prices fall to their lowest level since April.
Asian and European markets have been mixed to kick off the month, as manufacturing PMI indices have started to hit the tape. Here in the US, we’ll get the S&P 500 and ISM reads on the manufacturing sector at 9:45 and 10:00 AM, respectively.
In a speech from Taiwan overnight, Nvidia (NVDA) CEO Jensen Huang called 2026 “the year of agents”. In the evolution of AI, that’s definitely been the case, and the side-effect of that trend in AI is that in the stock market, 2026 has been the year of semiconductors. With a year-to-date gain of 81.1% through the end of May, the Philadelphia Semiconductor Index (SOX) has easily had its best start to a year in its history.
Before 2026, the best start to a year for the SOX was its first full year in 1995, when it rallied 52.8%, or nearly 30 percentage points less than this year’s gain. An 81% gain to start the year is impressive under any circumstances, but when you consider the size of the sector, 81% is almost unbelievable.
Besides having a monster gain at the index level, the rally in semis has been broad. Of the index’s 30 components, eight have more than doubled, including three that are up over 200%. The average gain of all 30 components has been modestly better than the index itself (+87%), indicating that, unlike the S&P 500, it hasn’t been just the biggest stocks in the index driving the gains. Participation has been so broad, in fact, that every stock in the SOX has outperformed the S&P 500 so far this year.
What really stands out about the chart below, though, is NVDA’s performance relative to all the other members of the SOX. With a gain of 13.2% YTD, it’s easily the worst performer in the index and outperforming the S&P 500 by less than three percentage points. So, while all of the major financial outlets are focusing endlessly on last night’s announcements from NVDA out of Taiwan, investors have been looking elsewhere.
Relative to the rest of the semis space, NVDA has been giving up ground for nearly a year now. The chart below shows the stock’s relative strength versus the SOX since the launch of ChatGPT in late 2022. While the stock saw blistering outperformance in the first two years after ChatGPT’s launch, it moved sideways relative to the SOX for nearly a year, and since last August, it has been steadily giving up ground to the index’s other 29 components.
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