MW The surprising stocks powering the chip sector toward its first new high in a month

By Emily Bary

Analog-semiconductor stocks have been major laggards over a multiyear span, but Microchip's latest commentary is fueling hopes for a sustained recovery

Shares of Microchip, an analog-semiconductor company, were leading the PHLX Semiconductor Index higher on Tuesday.

The PHLX Semiconductor Index is en route to its first record close in nearly a month, and the momentum is being driven by stocks that have been largely uncelebrated over a multiyear span.

Analog-chip stocks have badly lagged the broader chip sector in the past two years, yet they've outperformed over the past month, noted Cantor Fitzgerald analyst Matthew Prisco. They were leading the way again on Tuesday, with Microchip Technology shares (MCHP) up 10.6% and shares of Texas Instruments $(TXN)$ and NXP Semiconductors $(NXPI)$ each up 8.2%, at last check.

Microchip boosted its outlook late Monday, saying that it expects to report about $1.185 billion in revenue for the December quarter - above its original forecast that called for $1.109 billion to $1.149 billion, and also ahead of subsequent commentary projecting that revenue would be near the high end of that range.

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"We continue to experience a fairly broad-based recovery in most of our end markets driven by progress we have made in inventory correction in distribution as well as direct customers, and with new customer designs turning to production," CEO Steve Sanghi said in a release, calling out strong December bookings, a measure of contracted business.

The commentary helped signal to investors "that we have officially turned the corner and are now in recovery mode," according to Cantor's Prisco. The upbeat tone was giving a lift to peer stocks as well.

What's next for analog names? "We believe that the setup is incrementally better for the group to grind higher as investors position books" for the new calendar year, Prisco wrote.

He recommended a somewhat selective approach, tabbing Microchip and Analog Devices $(ADI)$ shares as his top bullish ideas for the coming earnings season. Microchip already delivered good news around revenue, " but more importantly, we see upside to modeled [gross-margin] expansion, which should drive the stock higher," Prisco wrote. And Analog Devices could be due for a "sizable raise" itself.

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Dow Jones Market Data noted that with the PHLX Semiconductor Index SOX up more than 2% recently at 7,619.12, it was on pace to surpass its current closing high of 7.467.49, which was set on Dec. 10.

Another big gainer in the sector is Lam Research $(LRCX)$, a chip-equipment stock that some analysts say is in a good spot to benefit from the continued artificial-intelligence boom. That stock was recently up 7.1% midday Tuesday.

In all, 23 of the 30 members of the index were in positive territory for the day, according to Dow Jones Market Data.

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-Emily Bary

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January 06, 2026 13:21 ET (18:21 GMT)

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