What Happened?

A number of stocks jumped in the afternoon session after industry giant Taiwan Semiconductor Manufacturing Co. posted stronger-than-expected quarterly results, fueling optimism about sustained demand for artificial intelligence (AI) hardware. 

As the world's largest contract chipmaker, TSMC's performance is often seen as a key indicator for the entire tech industry. The company reported record fourth-quarter revenue, surpassing Wall Street estimates, driven by robust demand for advanced chips used in AI applications. This positive report has created a ripple effect across the sector, boosting shares of other semiconductor companies and equipment suppliers like ASML, Nvidia, and AMD. Investors are interpreting TSMC's success and its plans to increase capital spending as a strong signal that the AI-driven upcycle for semiconductors is resilient and likely to continue.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) jumped 5.2%. Is now the time to buy Semtech? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company IPG Photonics (NASDAQ: IPGP) jumped 3.6%. Is now the time to buy IPG Photonics? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Allegro MicroSystems (NASDAQ: ALGM) jumped 3.3%. Is now the time to buy Allegro MicroSystems? Access our full analysis report here, it’s free.
• Analog Semiconductors company Power Integrations (NASDAQ: POWI) jumped 3.4%. Is now the time to buy Power Integrations? Access our full analysis report here, it’s free.

Zooming In On Semtech (SMTC)

Semtech’s shares are extremely volatile and have had 51 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 7 days ago when the stock dropped 3.5% on the news that a broader market rotation out of the technology sector led to profit-taking following a recent rally. 

The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. 

Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.

Semtech is up 2.5% since the beginning of the year, and at $77.16 per share, it is trading close to its 52-week high of $80.54 from December 2025. Investors who bought $1,000 worth of Semtech’s shares 5 years ago would now be looking at an investment worth $997.87.

Microsoft, Alphabet, Coca-Cola, Monster Beverage—all began as under-the-radar growth stories riding a massive trend. We’ve identified the next one: a profitable AI semiconductor play Wall Street is still overlooking.Go here for access to our full report, it’s free.