The current rally in chip stocks is largely due to the increasing popularity of artificial intelligence (AI) as AI-related spending becomes a larger portion of semiconductor companies' revenue flowing directly into ETFs, particularly those based on market capitalization. This shift is less pronounced in equal-weight and factor-based ETFs. The rise in CPU prices indicates that demand is increasing, outpacing supply. However, this could pose a challenge for semiconductor manufacturers as more pricing power increases for them in the short term, but also potentially impact their long-term earnings. Despite strong earnings momentum, valuations are becoming increasingly difficult to overlook. The semiconductor space is also showing early signs of divergence, with names related to AI moving higher while others lagging behind.