Semiconductor Surge Powers Nasdaq 100 to Weekly Gains

NASDAQ 100 US6311011026

Wall Street's primary narrative remains firmly anchored in artificial intelligence, providing significant tailwinds for the technology-heavy Nasdaq 100. The index posted a solid advance on Friday, overcoming headwinds from rising bond yields and weakness in consumer discretionary stocks. Semiconductor companies led the charge, while consumer names with heavy exposure to China faced selling pressure. Beyond the daily gain, the critical question for investors is the sustainability of this AI-fueled upward trend.

Closing 1.31% higher, the Nasdaq 100 significantly outperformed the broader market. This strength stemmed from a mix of renewed AI optimism and several company-specific developments that particularly benefited technology and chip stocks.

As the Dow Jones Industrial Average struggled under the weight of a steep decline in Nike (NKE), the Nasdaq found support in Micron Technology's (MU) impressive earnings and a strategically important TikTok agreement involving Oracle (ORCL). Trading volumes were notably elevated due to "triple witching"—the simultaneous expiration of stock options, index futures, and index options. This quarterly event traditionally triggers heightened volatility and rapid portfolio adjustments. Additional churn occurred ahead of the Nasdaq 100's index rebalancing, set to take effect on Monday.

A key observation was the index's decoupling from the bond market. Despite the yield on the 10-year U.S. Treasury note climbing to 4.13%, technology equities showed remarkable resilience. The market appears to have largely digested the Federal Reserve's 25-basis-point rate cut from December 10th, refocusing attention on corporate earnings growth.

Sector Performance: Chips Shine, Consumer Stocks Fade

Investor appetite was concentrated in semiconductors and software, especially companies directly linked to AI infrastructure expansion.

• Micron Technology (MU): The memory chipmaker was the standout performer. The company reported record first-quarter 2026 revenue of $13.6 billion, a 57% year-over-year increase, and issued guidance for the current quarter of $18.7 billion, well above expectations. Crucially, management stated that its production of High-Bandwidth Memory (HBM)—a key component for AI data centers—is sold out through 2026. The stock surged to new all-time highs on the news.
• Oracle (ORCL): Shares rallied strongly after the company announced finalized binding agreements for a new U.S. TikTok joint venture with Silver Lake and MGX. Scheduled for completion on January 22, 2026, the deal positions Oracle as the guardian of U.S. user data, mitigating the risk of a platform ban.
• Western Digital (WDC): The data storage specialist saw substantial inflows ahead of its official inclusion in the Nasdaq 100 at the start of the week, as index funds and ETF providers adjusted their holdings.
• Nvidia (NVDA): Nvidia also moved higher. Supportive analyst commentary, including notes highlighting the stock's historically attractive valuation relative to the broader semiconductor sector (with a forward P/E under 25), bolstered demand.
• Lam Research (LRCX): The chip equipment manufacturer hit a new record high, driven by rising capital expenditure plans from major memory chipmakers. This reinforces expectations for a prolonged investment cycle in AI hardware.

On the losing side were primarily consumer-focused companies with significant China exposure:

• Nike (NKE): The athletic wear giant plunged after reporting a 17% revenue drop in China and cutting its gross margin forecast due to anticipated tariff impacts of $1.5 billion. While Nike carries less weight in the Nasdaq 100 than in the Dow, its warning signals clear risks for consumer stocks reliant on Chinese demand.
• Other Consumer Discretionary Stocks: Additional cyclical consumer names with heavy China exposure also faced pressure. Weak signals from Chinese consumer demand and fears of escalating trade conflicts weighed on the entire sector.

Friday's trading thus highlighted a market divergence: the "China consumer story" is faltering, while the "China production story"—specifically, the global supply of AI hardware—remains robust.

Technical and Mechanical Drivers

From a technical perspective, the Nasdaq 100 appeared sturdy. The index broke above a near-term resistance level during the session, indicating persistent buying interest. The Relative Strength Index (RSI) reading of 55.2 sits in a neutral-positive zone, showing no clear overbought signals.

Key technical and mechanical details:

• Nasdaq 100 Friday Close: 25,346 points
• Year-to-Date Performance: Up approximately 20.8%, sitting just under 3% below its recent 52-week high.

The index remains near its peaks but not extremely extended from its moving averages. The 200-day moving average is about 6% lower, suggesting a solid uptrend without excessive exuberance.

Notable institutional activity was observed in the chip sector. Large block trades were recorded in equipment makers like Lam Research and Applied Materials (AMAT), as well as in memory providers. This points to a targeted rotation: away from pure software narratives and toward the hardware essential for powering next-generation AI data centers.

The unusually high closing-week volumes were attributable to two technical factors:
1. Triple Witching: The expiration day caused sharp volume spikes, especially in the final trading hour, as derivatives expired and positions were rolled or closed.
2. Index Rebalancing: Ahead of Monday's official Nasdaq 100 reconstitution, extensive block trades occurred. Stocks like Western Digital and Monolithic Power Systems (MPWR) saw above-average demand as benchmark-tracking funds built their required positions.

Macro Context and Forward View

These price movements unfolded against a backdrop of mixed macroeconomic signals. The latest Fed decision has been absorbed, and while long-term U.S. bond yields have risen, the expectation of robust earnings growth for AI beneficiaries is currently overshadowing interest rate concerns. A notable thematic shift is underway: market participants are increasingly looking beyond "generative AI" toward "agentic AI"—systems capable of autonomous action and managing complex task chains. Oracle's recent communications explicitly reference this trend, providing further support for the elevated valuations of infrastructure and platform companies.

Simultaneously, the divide between winners and losers in the China narrative is widening. Firms dependent on Chinese consumer demand, like Nike, are grappling with weaker results and tariff risks. Conversely, chip and AI companies that primarily profit from global infrastructure projects continue to advance largely unchecked.

A volatile opening is anticipated for Monday, December 22nd. The official Nasdaq 100 rebalancing takes effect, with Western Digital and Monolithic Power Systems fully integrated into the index, altering its weightings. Short-term fluctuations from profit-taking following the high-volume expiration day are possible. However, the overarching trend remains driven by the persistent wave of AI investment, spearheaded by semiconductor and hardware equities.