BTIG has told investors to use any rebound in semiconductor stocks to cut their exposure. The firm expects a drawn-out decline in the sector that could stretch into 2027.
The warning followed an 11.4% weekly drop in the Philadelphia Semiconductor Index (SOX), its steepest since April 2025. Meanwhile, the iShares Semiconductor ETF (SOXX) has now fallen for 9 straight sessions. Despite this, it remains up nearly 64% in 2026.
History Offers Chip Stocks Bulls Little Comfort
BTIG chief market technician Jonathan Krinsky laid out the case in a research report published Sunday. He pointed to growing doubts around artificial intelligence (AI) stocks.
“There are certainly more doubts creeping in about the AI complex of late. While those may prove to just be smoke, history suggests where there’s smoke there’s often fire,” Krinsky said.
Krinsky expects a relief rally but doubts it will hold. After past weekly SOX losses of 10% or more, the index rose the next week 43% of the time.
The average gain in that week was 1.7%. However, the median outcome was a 1.7% loss. Three weeks out, the index traded higher in just 60% of cases.
For investors trimming positions, BTIG flagged roughly $490 as key support for SOXX. A break below that level could send the ETF toward its 200-day moving average near $468.
BTIG also cautioned against taking comfort in the S&P 500’s relative calm. Since June 1, 9 of its 11 sectors have fallen at least 9% from their peaks. The index itself has dropped no more than 5% over that period.
Dalio, Panmure Liberum and the IMF Raise Similar Alarms
BTIG’s chip call joins a string of AI bubble warnings from investors and policymakers this month. Earlier this month, Bridgewater founder Ray Dalio said the AI bubble was nearing its bursting point.
Panmure Liberum’s Joachim Klement also sees the AI trade breaking down as soon as 2027 or 2028.
The International Monetary Fund (IMF) followed on October 13. Its latest financial stability report named an AI-driven market correction as one of 3 salient risks to global financial stability.
“The consequences of an AI correction could be global, with some jurisdictions more sensitive than others,” it read.
The IMF also flagged rising leverage tied to AI. It pointed to circular financing, where hyperscalers fund weaker AI firms in exchange for future revenue commitments.
Both BTIG and Panmure Liberum point to 2027 as the window for deeper losses. In the near term, SOXX’s $490 level may show whether investors are taking that advice.
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