Key Highlights

  • Semtech hit a new 52-week high on Friday, trading at $201.24, with the stock having more than doubled so far this year.
  • Oppenheimer raised its price target on Semtech to $225 from $200 about 20 hours before Friday's move, citing strong Demand across artificial intelligence data centers and forecasting data-center sales will become a much bigger part of total revenue.
  • Market commentary grouped Semtech with MACOM Technology Solutions, Texas Instruments, Amkor Technology and Teradyne as chip stocks rising because the weak payrolls data pulled Treasury yields and rate-hike expectations lower.
  • Not everything in AI hardware rose: hard-drive makers Seagate Technology and Western Digital plunged after a report said Toshiba plans to double its hard-drive capacity.

Semtech (NASDAQ:SMTC) hit a new 52-week high on Friday, trading at $201.24 as the chipmaker benefited from both a raised price target at Oppenheimer and a sector-wide rally in semiconductors. The gain made Semtech one of the stronger chip names on the Nasdaq Composite. The stock has more than doubled so far this year.

Oppenheimer's AI Call

About 20 hours before Friday's move, Oppenheimer raised its price target on Semtech to $225 from $200. The firm cited strong demand across artificial intelligence data centers, and forecast that data-center sales will become a much bigger part of the company's total revenue. The analyst was not named in the report.

Semtech makes analog and mixed-signal chips, including high-speed connectivity products that move data between servers and switches inside data centers. As AI clusters grow, they need ever faster links between thousands of processors, which has opened a large opportunity for companies like Semtech. The company also supplies chips for wireless Internet of Things networks and industrial uses.

As with all analyst targets, Oppenheimer's figure reflects the firm's own view of Semtech's prospects.

The Chip Rally

The broader trigger came from the September jobs report. Employers added just 29,000 jobs, well short of the roughly 84,000 economists expected, and earlier months were revised down by a combined 60,000. That cut expectations for another Federal Reserve rate hike at the October 27-28 meeting.

Market commentary grouped Semtech with MACOM Technology Solutions, Texas Instruments, Amkor Technology and Teradyne as chip stocks rising because the weak payrolls data pulled Treasury yields and rate-hike expectations lower. Teradyne was the top gainer in the S&P 500.

Larger names joined in. Nvidia hit a record high during the session, and Arm Holdings, AMD and Intel all posted strong gains. The Nasdaq Composite rose 319.27 points to 27,190.86, setting an intraday record without a record close, while the Nasdaq-100 closed at an all-time high of 30,807.93.

Data-Center Connectivity in Demand

Semtech was not the only connectivity name to benefit. Applied Optoelectronics, which makes optical transceivers for data centers, surged. MACOM, which makes analog and optical chips, also climbed. Broadcom finished higher after a report said a financing syndicate is amassing about $60 billion to fund chips for Anthropic and other AI companies.

Not everything in AI hardware rose. Hard-drive makers Seagate Technology and Western Digital plunged after a report said Toshiba plans to double its hard-drive capacity.

The rally also faced a headwind from the bond market. Treasury yields reversed to close higher after an early drop, leaving the 10-year near its highest level since 2002.

Friday's buying reached well beyond Nvidia. Suppliers of the chips and optics that connect AI systems drew strong demand, and Semtech, whose stock has more than doubled this year, was one of the clearest beneficiaries.

Watching Whether Semtech Can Approach $225

Investors will watch whether Semtech can hold above its new high and approach Oppenheimer's $225 target. The company's next Earnings report will be the key test of the data-center growth story. The Fed's October 27-28 meeting and the direction of Treasury yields will shape the chip sector's momentum. Earnings season begins with PepsiCo on October 8 and Delta on October 9, with the big banks following on October 13 and 14.