Thursday brought the kind of economic data that makes growth investors smile: inflation came in cooler than expected, Treasury yields dropped, and tech stocks caught a tailwind. Add in a strong earnings report from Micron Technology Inc. (MU), and you had all the ingredients for a semiconductor-led rally across technology ETFs.
The November Consumer Price Index printed at 2.7% year-over-year, slightly below what economists had penciled in. Even better, core inflation softened to 2.6%, marking the lowest reading since March 2021. That's the kind of number that makes traders rethink their Fed expectations. The 10-year Treasury yield drifted down toward 4.11%, which is music to the ears of anyone holding long-duration growth assets that look more attractive when discount rates fall.
Chip ETFs Take Center Stage
If you wanted to see where the action was, you looked at semiconductor funds. The VanEck Semiconductor ETF (SMH), which tracks a modified market-cap-weighted index of leading chipmakers, climbed 2.4% on Thursday. The fund has hefty exposure to names like NVIDIA Corp (NVDA), Taiwan Semiconductor Manufacturing Co Ltd (TSM), and Broadcom Inc (AVGO)—exactly the kinds of companies that are sensitive to both AI spending trends and interest rate expectations.
Meanwhile, the iShares Semiconductor ETF (SOXX), which follows a more diversified and rebalanced approach, jumped 3%. Investors are leaning into the narrative that softer inflation gives the Federal Reserve room to support economic growth without worrying too much about reigniting price pressures. And Micron's earnings beat provided concrete evidence that memory chip pricing and AI-driven demand are stabilizing, which lifted sentiment across the entire chip sector.
Nasdaq Funds Ride the Wave
The gains weren't limited to semiconductors. Nasdaq-linked ETFs benefited from the same dynamic: lower yields mean higher valuations for megacap tech companies with long-dated cash flows. The Invesco QQQ Trust ETF (QQQ), which has major exposure to Apple Inc (AAPL), Microsoft Corp (MSFT), and Nvidia, got a boost from declining discount rates. A weakening dollar also helped, since it makes overseas revenue look better when translated back to U.S. earnings.
Growth-focused funds like the Vanguard Growth Index Fund ETF (VUG) also gained traction. These ETFs tend to outperform when inflation pressures ease and bond yields retreat, since the companies they hold are typically valued based on future earnings that look more appealing when you're not discounting them as heavily.
But Valuation Concerns Haven't Disappeared
As much as Thursday's rally felt good, there's a backdrop worth remembering. Semiconductor ETFs have posted unusually strong gains so far in 2025, and valuations are starting to look stretched. That leaves less cushion if the next batch of inflation data or earnings reports disappoints. Some investors are hedging their bets by pairing tech-heavy ETFs with equal-weight or low-volatility strategies to protect against potential downside.
Still, for now at least, the combination of cooling inflation and falling yields is proving to be a powerful catalyst for technology funds. And once again, it's the semiconductor sector leading the charge, riding the twin engines of AI optimism and easier financial conditions. Whether that momentum holds depends on what the next inflation print and earnings season bring, but Thursday offered a glimpse of what tech investors want to see: economic data that keeps the Fed friendly and company results that justify the optimism.
