Chips Defy the Fed: Semiconductor Stocks Rally as Hike Odds Jump

US semiconductor and memory stocks rallied sharply Friday even as a strong jobs report pushed September rate-hike odds near 65%.

August nonfarm payrolls came in at 162,000, far above expectations of roughly 53,000 to 56,000, sending Treasury yields higher and pushing the 2-year yield to its highest level since January 2025, according to TradingKey. The Dow, Nasdaq and S&P 500 all slipped, but the Philadelphia Semiconductor Index rose more than 3% in early trading. Micron gained over 4%, SanDisk jumped 6.74%, and Seagate and Western Digital also rallied as memory names led the advance.

Strong employment data typically pressures high-valuation growth sectors, because rising yields raise discount rates on future earnings. International Business Times UK reports that traders lifted the implied probability of a 25-basis-point September hike to about 65% from 55% before the report, while CME FedWatch showed odds rising to 60.2% from 49.4%. Yet the chip sector outperformed anyway, a consensus-breaking result given how rate-sensitive semiconductors are usually presumed to be.

TradingKey attributes the rally to three forces: intact AI capital-expenditure demand, supply tightness in memory, and an ongoing industry expansion cycle. As of press time, ASML was up 4.24%, Marvell 4.21%, Intel 3.71%, AMD 2.91% and Nvidia 2.68%. TradingKey also notes Micron plans to roughly double monthly high-bandwidth memory capacity to about 100,000 wafers by the end of 2026, underscoring the supply tightness supporting memory shares.

President Trump demanded on Truth Social that the Fed cut rates, saying the United States 'should have the LOWEST RATE of any country in the World,' and threatened to stop trading with countries running deficits against the US unless rates come lower, according to The Economic Times. TradingKey reports the statements did not convert strong payrolls into a rate-cut argument, but signalled the White House will keep pushing for easing, giving growth stocks breathing room by offsetting upward pressure on rates.

The Fed's next meeting runs September 15-16, and Chair Kevin Warsh said last week at Jackson Hole that inflation had not shown sufficient improvement and the central bank might have 'more work to do,' per PBS. PBS also reports Fed governor Christopher Waller said the August inflation figures due September 11 will largely determine his vote — he would 'consider a rate hike' if inflation comes in hot.

Markets now hinge on the September 11 CPI print. PBS quotes Neuberger portfolio manager Joseph Purtell saying the September meeting 'is going to be knife edge and it's going to come down to how the CPI data prints.' PBS reports New York Fed president John Williams was encouraged by recent inflation data but wants more evidence it is declining, suggesting he could accept holding rates steady. If inflation continues cooling, rate-hike pressure could fade — and the chip rally would have more room to run.