Semiconductor Rally Accelerates as Traders Chase AI Momentum Despite Rising Costs

The semiconductor sector has entered a period of intense momentum, with the VanEck Semiconductor ETF (SMH) climbing more than 30% this month. The rally has been characterized by a consistent upward trajectory, with the group posting gains in 17 of the last 18 trading sessions. This bullishness is being fueled by aggressive options activity. Traders are increasingly paying premiums for call options to bet on further upside, even as rising implied volatility makes these contracts more expensive to acquire. Intel served as the primary catalyst for the latest leg higher, with shares surging 23% following overnight earnings. This move pushed Intel's market capitalization above $400 billion for the first time since the 2000 Dotcom Bubble. Competitor Advanced Micro Devices (AMD) followed suit, adding 15% to its value. Memory stocks, specifically Micron and Sandisk, are seeing heavy bullish positioning driven by AI data center demand. In these names, call options outnumber puts 2:1, and total call premiums paid are at least four times larger than those for puts. Nvidia remains a focal point as the market looks toward its May 20 earnings report. While its implied volatility is currently lower than the SMH ETF, significant bets are being placed. One notable trade involved the purchase of 7,500 $230-strike calls expiring May 15—a $413,000 transaction betting on a 13% price increase from current levels.