What Happened?

A number of stocks jumped in the morning session after strong results from chipmaker Nvidia, eased lingering concerns about a potential bubble in the artificial intelligence sector. 

The tech giant delivered another blockbuster earnings report, with sales, profits, and guidance exceeding Wall Street expectations. CEO Jensen Huang let the data do the talking as he acknowledged the growing sentiment about an AI bubble, while affirming that sales for Nvidia's current-generation GPU, called Blackwell (mostly used for AI applications), are "off the charts." 

A stronger-than-expected September jobs report from the Bureau of Labor Statistics reinforced this bullish sentiment. Nonfarm payrolls rose by 119,000, easily surpassing the consensus estimates of 50,000. While the unemployment rate ticked up to 4.4% and wage growth slowed slightly, the data suggest the U.S. economy remains on a firm footing. While this resilience made some investors unsure of the Fed's December rate decision, the market welcomed the news, rallying on the strength of a solid economy and a booming tech sector.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) jumped 5.3%. Is now the time to buy Semtech? Access our full analysis report here, it’s free for active Edge members.
• Semiconductor Manufacturing company Kulicke and Soffa (NASDAQ: KLIC) jumped 14%. Is now the time to buy Kulicke and Soffa? Access our full analysis report here, it’s free for active Edge members.
• Semiconductor Manufacturing company FormFactor (NASDAQ: FORM) jumped 3.7%. Is now the time to buy FormFactor? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Kulicke and Soffa (KLIC)

Kulicke and Soffa’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. But moves this big are rare even for Kulicke and Soffa and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 7 days ago when the stock dropped 2.7% on the news that markets continued to retreat, as investors re-evaluated the high valuations of stocks that benefited from the artificial intelligence boom. 

After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced. There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.

Kulicke and Soffa is down 16% since the beginning of the year, and at $39.50 per share, it is trading 21.8% below its 52-week high of $50.54 from December 2024. Investors who bought $1,000 worth of Kulicke and Soffa’s shares 5 years ago would now be looking at an investment worth $1,314.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.