According to Woofun AI, BTIG Chief Market Technician Jonathan Krinsky has issued a stern warning, advising investors to use any rebound in the semiconductor sector as an opportunity to quickly reduce positions, as the industry's downturn cycle is expected to extend until 2027.
This judgment stems from growing market skepticism about the valuation logic of artificial intelligence. Krinsky noted that while current concerns may ultimately prove to be a false alarm, historical patterns suggest that "where there is smoke, there is often fire," and short-term technical rebounds are unlikely to reverse long-term structural pressures.
The Philadelphia Semiconductor Index (SOX) recently suffered a sharp decline, falling 11.4% in a single week, marking its largest weekly drop since April 2025. Meanwhile, the iShares Semiconductor ETF (SOXX.US) has recorded declines for 9 consecutive trading days, although its cumulative gain in 2026 remains close to 64%.
Data compiled by Woofun AI reveals that historical backtesting shows a typical path following such severe volatility: when the SOX index posts a weekly decline of 10% or more, in 43% of cases the index rises the following week with an average gain of 1.7%, but the median performance is actually a decline of 1.7%. The more critical variable lies in the medium-term trend, as data shows that after three more weeks, only 60% of cases see the index in positive territory, meaning the sustainability of short-term rebounds is extremely low, and investors attempting to buy the dip face a high probability of medium-term downside risk.
From a technical structure perspective, BTIG views $490 as a key support level for SOXX. Once this defense line is breached, the ETF price will likely further probe the 200-day moving average near $468. It is worth noting that the relative stability of the S&P 500 index is highly deceptive. Since June 1, among the 11 sectors that make up the index, 9 have seen their stock prices fall at least 9% from their peaks, while the S&P 500 index itself has never declined more than 5%. This divergence in internal structure warns investors that the calm of macro indices masks the bearish alignment of underlying assets. The fragility of the semiconductor sector is being amplified through sector divergence, and any blind optimism about broad market stability may overlook systemic risks at the individual stock level.
BTIG's assessment is not an isolated view but part of a consensus among top global institutions this month regarding the risk of an artificial intelligence bubble. Bridgewater founder Ray Dalio explicitly warned earlier this month that the AI bubble is about to burst; Panmure Liberum's Joachim Clement believes that AI-related trading conditions could deteriorate as early as 2027 or 2028. On October 13, the International Monetary Fund, in its latest financial stability report, listed an AI-induced market correction as one of the three major risks threatening global financial stability, specifically noting that such a correction could have global repercussions, with some regions being hit harder than others. The report also highlighted rising AI-related leverage and the circular financing model in which large technology companies provide funding support to weaker AI companies in exchange for future revenue commitments.
With 2027 being viewed by multiple institutions as a node for a significant market decline, whether SOXX can hold the $490 level in the short term will become a key litmus test of whether the market has accepted this grim reality.
For more heavyweight Hong Kong stock news, download the Zhitong Finance app. For more Hong Kong and overseas wealth management information, please visit www.zhitongcaijing.com (search "Zhitong Finance"); to join the Zhitong Hong Kong stock investment group, please add Zhitong customer service WeChat (ztcjkf).
Comments