Nvidia mostly sat out the chip sector's best quarter ever. What needs to change?

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Nvidia mostly sat out the chip sector's best quarter ever. What needs to change? Published Tue, Jun 30 20262:47 PM EDTKevin Stankiewicz@in/kevin-stankiewicz-b5593466Semiconductor stocks are about to complete their best quarter ever. And yet, the biggest chipmaker of them all — Nvidia — has largely sat out the rally. To reignite its stock, Jim Cramer said Nvidia needs to open its checkbook and return more cash to investors. The Philadelphia Semiconductor Index , known as the SOX, has soared more than 80% in the second quarter, as demand for artificial intelligence computing strengthened and broadened. The SOX leaderboard for the quarter is dotted with blistering gains: Micron is up 239% through Monday's close, fueled by soaring prices for memory and storage chips thanks to a major supply crunch. Lam Research , which makes essential equipment used in the semiconductor manufacturing process, is up 92%. Club name Intel has nearly tripled, and Advanced Micro Devices has ripped more than 165%. Both companies are longtime makers of central processing units (CPUs) for data centers. The first wave of the AI compute boom was driven by accelerator chips, most notably Nvidia's graphics processing units (GPUs). The second quarter, however, marked Wall Street's full recognition that an emerging type of AI computing — agentic systems capable of completing tasks autonomously — requires a ton of CPU power to go along with the GPUs. This also helped a fellow Club name, Arm Holdings , which is pushing deeper into the CPU market, climb by over 125% during that period. Even Texas Instruments , long considered a boring bet on industrial markets, got in on the action; it's up some 47% thanks to accelerating growth for power management chips used in data centers. Then there's Nvidia, whose cutting-edge GPUs kickstarted this AI boom and turned it into the world's most valuable company. It is the worst-performing stock in the entire SOX in the April-to-June period, with a gain of roughly 12%. The stock's frustrating performance relative to its chip peers dates back to last year, but the second-quarter weakness hammers the point home. This has been a stretch in which investors seemingly wanted only to buy semiconductor stocks, yet Nvidia has been unable to regain the momentum of yesteryear. .SOX NVDA 1Y mountain The Philadelphia Semiconductor Index versus Nvidia's stock over the past 12 months. The problem cannot be explained by looking at Nvidia's reported results. In its May 20 earnings report, the annual growth rate of its data center business actually accelerated. The segment's revenue surged 92% in the April quarter to $75.2 billion, up from 75% growth to $62.3 billion in the February quarter. Plus, its guidance for the May-to-July period was comfortably above Wall Street estimates. What's ailing the stock is a combination of factors — some related to market dynamics and others to hard-to-quell concerns about rising competition. As the AI compute narrative evolved this year, Nvidia's stock was likely a source of funds for investors looking to capitalize on memory and CPU shortages, and the need to buy more chipmaking machines from the likes of Lam Research and Applied Materials . Nvidia shares rose 1,000% from the launch of ChatGPT in late November 2022 through 2025, compared with a 75% advance for the S & P 500 and a 159% gain for the SOX. In other words, there's been a ton of money already made in the stock, and investors — especially short-term traders like hedge funds — are always hunting for the hot new thing. As Jim has stressed before , companies selling a product in short supply are the hot new things in this market. Companies like Micron and Applied Materials are saying they don't know when supply and demand will catch up, Jim said Tuesday on CNBC. "Nvidia does not and cannot say that." Of course, we're also always looking for new ideas at the Club. It's why we added Arm Holdings to the portfolio in April and Intel earlier this month . Arm is a straightforward bet on CPU growth. Intel also offers greater exposure to the CPU market and could benefit as the industry seeks an alternative to Taiwan Semiconductor Manufacturing Co ., which dominates advanced chip production and packaging. Nvidia also makes CPUs, but the company is still best known for its bread-and-butter GPUs. Nvidia's GPUs and other AI accelerator chips perform the complex math that underpins AI models. In agentic AI systems, CPUs are responsible for orchestration and for keeping the GPU busy. But they also handle many of the tasks that agents are asked to do — like searching the web and updating records in a database. The two kinds of chips work together, but agentic systems require far more CPUs than a chatbot that gives a user a simple written answer to thei