Tech Sector Resilience Amid Rate-Cut Expectations: Strategic Entry Points in Semiconductors and AI-Driven Leaders

Assessing Near-Term Momentum and Earnings Alignment in Key Tech Subsectors

The U.S. Federal Reserve’s anticipated rate cuts in September and December 2025 have ignited renewed interest in the tech sector, particularly in semiconductors and AI-driven innovation. With the Fed poised to reduce rates by 25 basis points in September—a decision likely to be confirmed at its September 16-17 meeting—investors are recalibrating their strategies to capitalize on lower borrowing costs and improved access to capital [3]. While the broader market remains divided on the efficacy of these cuts in stimulating economic growth [6], the semiconductor and AI subsectors have demonstrated robust earnings momentum, suggesting a strong alignment with the anticipated policy shift.

Semiconductor Sector: A Pillar of Resilience

The semiconductor industry has emerged as a cornerstone of tech resilience, with global chip sales projected to reach $697 billion in 2025, driven by generative AI adoption and data center expansion [4]. Broadcom (AVGO) exemplifies this trend, reporting Q3 2025 revenue of $16 billion—a 22% year-over-year increase—with its AI semiconductor segment surging 63% to $5.2 billion [1]. This growth was fueled by demand for custom AI accelerators and a fourth major customer securing over $10 billion in orders. The company’s Q4 guidance, projecting AI semiconductor revenue of $6.2 billion (a 66% YoY increase), underscores its leadership in the AI hardware race [1].

Applied Materials, another key player, reported record Q3 revenue of $7.3 billion, with its Semiconductor Systems segment contributing $5.43 billion—a 10% YoY rise [5]. The company’s advanced packaging revenue is expected to double to over $3 billion in the coming years, reflecting the industry’s shift toward complex AI-driven device architectures [5]. However, near-term uncertainties, particularly in China, have prompted caution. Applied Materials warned of a $500 million Q4 revenue decline in the region due to capacity digestion and export license delays [5].

AI-Driven Leaders: Navigating Growth and Valuation Challenges

The AI sector’s momentum is equally compelling, though valuation disparities among leaders highlight divergent investor sentiment. NVIDIA, the dominant force in AI accelerators, is expected to report Q3 2025 results marked by strong demand for its H20 chips in China and AI infrastructure [5]. UBS analysts have positioned NVIDIA as a key beneficiary of rate cuts, citing its pivotal role in enabling AI adoption [2]. However, the stock’s valuation—trading at a 13× price-to-earnings ratio—has outpaced peers like AMD, which faces challenges in monetizing its AI ambitions despite a projected $500 billion market by 2028 [4].

Keysight Technologies, meanwhile, has leveraged its digital infrastructure expertise to secure an 11% YoY revenue increase to $1.35 billion in Q3 2025 [5]. Its CEO emphasized the company’s strategic positioning in the AI supply chain, a narrative that aligns with broader rate-cut expectations.

Strategic Entry Points and Risk Considerations

For investors seeking exposure to the tech sector amid rate-cut expectations, valuation metrics and sector-specific dynamics are critical. Broadcom’s strong cash flow and AI backlog ($110 billion) position it as a defensive play, though its stock may already reflect optimism [1]. Conversely, AMD and Photronics Inc.—which exceeded Q3 earnings expectations with a 5.88% stock surge—could offer asymmetric upside if their AI product lines gain traction [1][3].

However, risks persist. Morgan Stanley cautions that the Fed’s rate cuts may not catalyze broad economic growth due to trade war uncertainties and immigration policy headwinds [6]. Additionally, geopolitical tensions, particularly in China, could disrupt supply chains and dampen near-term earnings for semiconductor firms like Applied Materials [5].

Conclusion

The interplay between central bank policy and tech sector performance in 2025 underscores the importance of a balanced approach. While rate cuts are likely to lower capital costs and boost valuations for AI-driven leaders, investors must remain vigilant about macroeconomic headwinds and sector-specific risks. Strategic entry points in semiconductors and AI—particularly for companies with strong earnings alignment and resilient business models—offer compelling opportunities, provided investors diversify across overexposed tech segments and incorporate defensive assets into their portfolios [1][3].

Source:
[1] AVGO Q3 2025: Revenue Reaches $16B, AI Semiconductor Sales Surge 63% [https://mlq.ai/news/avgo-q3-2025-revenue-reaches-16b-ai-semiconductor-sales-surge-63/]
[2] Why Nvidia and Other Chip Stocks' Slump Is an ... [https://www.investopedia.com/why-nvidia-and-other-chip-stocks-slump-is-an-opportunity-for-investors-ubs-says-11801856]
[3] Federal Reserve Poised for September Rate Cut Amid Weakening Job Market [https://markets.financialcontent.com/stocks/article/marketminute-2025-9-8-federal-reserve-poised-for-september-rate-cut-amid-weakening-job-market]
[4] 2025 Global Semiconductor Industry Outlook [https://www.deloitte.com/us/en/insights/industry/technology/technology-media-telecom-outlooks/semiconductor-industry-outlook.html]
[5] Applied Materials Q3 FY 2025 Results Show Solid Quarterly Performance [https://futurumgroup.com/insights/applied-materials-q3-fy-2025-results-show-solid-quarterly-performance/]
[6] Fed Rate Cut? Not So Fast [https://www.morganstanley.com/insights/articles/fed-rate-cut-september-2025-forecast]