Semiconductor stocks saw a significant surge this week, reinforcing their status as one of the most overbought sectors in the market as investors continued to rally behind the industry’s promise. Both the S&P 500 and the tech-centric Nasdaq Composite experienced upward momentum, with gains of 0.55% and 1.50%, respectively. This positive trend was largely propelled by the performance of semiconductor companies and increasing optimism surrounding potential peace negotiations between the U.S. and Iran.
Thursday marked a pivotal moment as both indices reached new intraday highs, driven by robust gains in chipmaker stocks. To analyze equity performance, CNBC Pro utilized its stock screener to identify the most overbought stocks, measured by their 14-day relative strength index (RSI). Generally, an RSI above 70 suggests a stock is overbought, indicating a potential for pullback, while a reading below 30 signals that a stock may be oversold and due for a rebound.
The iShares Semiconductor ETF (SOXX) reported its 18th consecutive positive session on Friday, concluding the week with an impressive 11.04% gain, underscoring the semiconductor sector’s strong showing. Key players that featured prominently in the week’s overbought stocks included Advanced Micro Devices, ON Semiconductor, NXP Semiconductors, Microchip Technology, Texas Instruments, and Analog Devices.
Texas Instruments experienced a notable increase in share price following its first-quarter earnings report, which exceeded expectations in both revenue and guidance. The company cited strong demand for its analog chips, essential for the expansion of AI data centers. In a similar vein, AMD shares also climbed, though without any specific news driving the momentum. Notably, Intel reported heightened demand for its central processing units (CPUs), signaling robust growth that investors interpreted as a positive indicator for other major semiconductor manufacturers like AMD.
However, market leadership appears increasingly selective, with Cameron Dawson, Chief Investment Officer at NewEdge Wealth, observing a narrowing focus within the market. He noted on CNBC’s “Closing Bell: Overtime” that while the narrative previously revolved around all “Mag Seven” stocks, the current spotlight seems to be on semiconductors alone.
In addition to semiconductor stocks, United Rentals made the overbought list, boasting an RSI of 84 after raising its sales forecast for the year to between $16.9 billion and $17.4 billion, anticipating momentum as it enters its peak season. Similarly, West Pharmaceutical Services experienced a surge following a strong earnings report, with adjusted earnings of $2.13 per share on revenue of $844.9 million, surpassing analyst expectations. The company ended the week with an RSI of 82.7.
Conversely, several aerospace and defense stocks found themselves in oversold territory, reflective of recent investor sell-offs. Notable names such as Northrop Grumman, Lockheed Martin, RTX, and L3Harris Technologies saw declines following easing tensions in the Middle East, which investors feared could signal the peak of defense spending amid potential shifts in congressional control later this year. President Donald Trump announced an extension of the ceasefire agreement between Israel and Lebanon, fostering a climate of optimism in the region.
Additionally, reports indicated that Iranian Foreign Minister Abbas Araghchi is set to hold talks in Pakistan regarding a second round of negotiations with U.S. officials, adding context to the shifting geopolitical landscape.
On the flip side, Tractor Supply landed on the oversold list, with a concerning RSI of 21.2. The stock fell sharply after the company reported disappointing first-quarter results, highlighting a downturn in nonessential spending as consumers grapple with economic uncertainties and rising fuel costs. Analysts on Wall Street responded by revising their price targets downward for the retailer.
Overall, the week’s developments reflect a complex and rapidly shifting market landscape, with sectors diverging significantly in performance based on evolving investor sentiments and external factors.
