Shares of semiconductor leaders Taiwan Semiconductor Manufacturing (TSM 2.35%), Intel (INTC 3.87%), and ASML Holdings (ASML 5.53%) were rallying today, up 2.5%, 4.2%, and 5.1%, respectively, as of 1:36 p.m. ET.

There wasn’t much company-specific news today. In fact, there was a slight negative for Intel and slight positive for TSMC. And yet, Intel rallied more than TSMC did today.

So the reason behind the sectorwide rally was likely two big macroeconomic data points released today, each of which allayed fears of recession, putting the economic “soft landing” scenario firmly back on track.

What recession?

This morning, the Commerce Department released July U.S. retail sales figures, which came in much higher than expected. Retails sales rose 1% month over month in July, much higher than the 0.3% expected by economists and a sharp rebound from June’s downwardly revised (0.2%) decline. Importantly for these three chip companies, spending on electronics rose 1.6%, while auto sales bounced back 3.6% after a cyberattack limited sales in June. Of note, autos are using more and more semiconductors these days with each new model.

Additionally, the Labor Department released unemployment claims for the week ended Aug. 10, showing just 227,000 claims — 7,000 lower than last week’s and below estimates of 235,000.

Taken together, these data points seemed to negate the weak job growth and rising unemployment rate we saw in June. Those prior data points spurred fears the Federal Reserve is behind the curve in cutting the federal funds rate, which could lead to a recession.

Given that the semiconductor sector is a cyclical business — although one with long-term growth — these stocks are highly sensitive to economic data. And since several names such as TSMC and ASML had already run up this year, they had pulled back on the recession fears. So, today merely reversed that trend.

Image source: Getty Images.

It also may be surprising that Intel was actually up more than TSMC today, given that there was slightly negative news for Intel and possibly positive news for TSMC.

According to the Financial Times, Japanese tech conglomerate Softbank (SFTB.Y 3.93%) has apparently pulled out of a chipmaking agreement with Intel. Softbank is reportedly planning on designing an artificial intelligence accelerator, and had apparently tapped Intel to produce it, as Intel is currently building out its own third-party foundry ecosystem.

According to the FT report, Softbank has backed out of that potential deal, which Softbank blames on Intel’s inability to meet volume and speed targets. The FT also reports Softbank is now in talks with TSMC to produce the chip.

Whether that is true or not — Softbank, after all, has a rather mixed record when it comes to its tech investments and initiatives in recent years — it’s curious Intel is up more than TSMC today.

That could be due to valuation, as Intel now trades for less than book value, while TSMC has soared this year. In addition, Intel’s main cash cow is still in PCs, which are perhaps more sensitive to macro data than AI and mobile chips, where TSMC excels. Intel will need the PC market to remain strong for the next year or so, as it eyes the end of its “catch-up” foundry buildout. Intel believes it will have gotten its technology on par with TSMC by the end of this year, although that proof remains to be seen. So, given its higher economic sensitivity and lower valuation, Intel soared more.

And of course, both companies will need to buy EUV lithography machines from ASML, depending on how much demand there is. Given the higher demand signals today, more investment in ASML’s EUV machines on the part of both companies just became more likely.

AI winners can be bought on dips

If you are a believer in the artificial intelligence trend, these marketwide drops such as the one we experienced over the past month offer good opportunities to pick up high-quality AI winners on the dip. ASML and TSMC certainly fit the bill, while Intel is more of a question mark in its turnaround today.

As you can see, when the market’s mood lightens, AI beneficiaries can recover in the blink of an eye.