The PHLX Semiconductor Sector Index, better known as SOX, has doubled in value over the course of 2023. The last time this index posted gains this aggressive was 1999, right before the dotcom bubble turned everyone’s portfolio into confetti.
AI demand is the engine behind the surge
The rally’s origin story is straightforward: artificial intelligence ate the world, and semiconductors are its teeth. The explosion in demand for AI chips, the specialized processors that power everything from large language models to autonomous driving systems, has sent chipmaker valuations into orbit.
Companies like Nvidia, AMD, Intel, TSMC, Micron, and Broadcom sit at the core of the SOX index. These aren’t speculative startups. They’re the firms actually manufacturing the silicon that makes AI possible, which gives the rally at least some fundamental underpinning.
The SOX index is market-cap-weighted, meaning the biggest companies exert the most gravitational pull on the number. When a company like Nvidia goes parabolic, it drags the entire index along for the ride, whether or not every other chipmaker deserves to be riding that wave.
