What Happened?
A number of stocks jumped in the morning session after President Trump clarified that he had no intention of removing Federal Reserve Chair Jerome Powell, a statement that helped calm markets. Earlier remarks had sparked fears of political interference in decision making at the central bank. With Trump walking back his earlier comments, investors likely felt more assured that monetary policy decisions would continue to be guided by data, not drama. That kept the Fed's word credible, and more importantly, gave investors a steadier compass to figure out where rates and the markets were headed next.
Adding to the positive news, the president made constructive comments on US-China trade talks, noting that the tariffs imposed on China were "very high, and it won't be that high. ... No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero."
Also, a key force at the center of the stock market's massive two-day rally was the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump's tariff rollout and abrupt 90-day pause, according to Goldman Sachs' prime brokerage data. The increased short position in the market created an environment prone to dramatic upswings due to this artificial buying force.
A short seller borrows an asset and quickly sells it; when the security decreases in price, they buy it back more cheaply to profit from the difference.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Advertising Software company Zeta (NYSE: ZETA) jumped 9.4%. Is now the time to buy Zeta? Access our full analysis report here, it’s free.
- Automation Software company SoundHound AI (NASDAQ: SOUN) jumped 9.2%. Is now the time to buy SoundHound AI? Access our full analysis report here, it’s free.
- Automation Software company ServiceNow (NYSE: NOW) jumped 7.6%. Is now the time to buy ServiceNow? Access our full analysis report here, it’s free.
- Consumer Subscription company Roku (NASDAQ: ROKU) jumped 9.2%. Is now the time to buy Roku? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) jumped 15.6%. Is now the time to buy Semtech? Access our full analysis report here, it’s free.
Zooming In On Semtech (SMTC)
Semtech’s shares are extremely volatile and have had 52 moves greater than 5% over the last year. But moves this big are rare even for Semtech and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock gained 23.5% on the news that the company reported impressive third-quarter 2024 results that blew past analysts' revenue and EBITDA expectations. Its full-year guidance for the same metrics outperformed Wall Street's estimates. While the top-line strength was broad-based, management called out the data center, which benefited from AI-driven product demand. Zooming out, we think this quarter featured some important positives.
Semtech is down 56% since the beginning of the year, and at $27.30 per share, it is trading 64.6% below its 52-week high of $77.15 from January 2025. Investors who bought $1,000 worth of Semtech’s shares 5 years ago would now be looking at an investment worth $645.39.
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