The Philadelphia Semiconductor Index is about to return to a "bull market," but analysts remain skeptical.

US stock market chip sector rebounded sharply on the back of strong earnings reports, now just one step away from a technical bull market. However, some analysts warn that the backlog of orders may not necessarily equate to realized revenue, and there are still doubts about the sustainability of AI infrastructure investment.

On Wednesday, the Philadelphia Semiconductor Index (SOX) closed up 2.49% at 12,399.38 points, just about 1.1% away from the 12,536.99 points threshold needed to enter a bull market. This round of gains was ignited by earnings reports from CoreWeave, Super Micro Computer, and Lumentum, all showing strong AI spending, with their share prices soaring by around 19%, 19%, and 13% respectively in a single day.

However, Dan Kemp, founder of the investment advisory firm Portfolio Thinking, poured cold water on market sentiment.

He pointed out that CoreWeave increased its full-year capital expenditure plan from $31 to $35 billion up to $35 to $39 billion, but its revenue guidance was "far more conservative", and the company’s net interest expense for the quarter reached $640 million, while adjusted operating profit was only $128 million. He stated: "We have yet to see consumer and enterprise spending sufficient to support commitments of this scale."

Downstream AI earnings reports boost sector sentiment

On Wednesday, chip stocks rallied broadly. In the storage chip sector, SanDisk rose by about 6%, Micron Technology was up about 5%, and SK Hynix’s American Depositary Receipts jumped 9%. AI chip leader NVIDIA was up 3%.

The direct catalyst for this rally was a batch of earnings reports released after Tuesday’s market close. Brian Mulberry, chief market strategist at Zacks Investment Management, said in written comments that these earnings reports "help confirm that the coverage of the AI trade is expanding, and it’s not just getting bigger in scale."

He explained that CoreWeave has confirmed that GPU demand remains strong, while Lumentum showed how this demand is further driving needs for data center power and operational infrastructure.

Dan Kemp also agreed that companies like CoreWeave and Super Micro, which are downstream in the AI industry chain and are responsible for chip connectivity and installation, offer investors a window into real chip demand through their financial reports, thus further boosting optimism toward the sector.

In addition, he believes that the US Consumer Price Index (CPI) data released Wednesday largely matched Wall Street expectations, which also supported the rally in chip stocks.

Order backlog figures raise concerns

Despite high market enthusiasm, some analysts remain cautious about the quality of order backlog numbers. Both CoreWeave and Super Micro emphasized their growing order backlogs in their financial reports, with Super Micro reiterating that new orders for the June quarter exceeded $60 billion.

Dan Kemp is skeptical about these figures, noting that some orders may be canceled or delayed. "Investors are entitled to view a large order backlog as a positive sign, but it should be priced as a range of possible outcomes rather than realized revenue," he said.

He further pointed out that for long-term investors, the core issue is whether demand growth is outpacing expectations already implied in stock prices. He said: "At this point, the evidence is much less reassuring."

Fundamentals diverge: Not all chip stocks benefit equally

Brian Mulberry emphasized that not all chip companies can benefit equally from the current AI boom, and in the long run, fundamentals will matter more than just price momentum. He noted that investors are currently seeking accelerating growth, not just chasing rising prices.

In his view, the companies with the strongest fundamentals include NVIDIA, Broadcom, and optical networking supplier Coherent—the latter’s stock rose more than 8% on Wednesday. Dan Kemp holds a similar view, believing that the degree of match between demand growth and valuation is key to judging long-term investment value.