No bullish run on Wall Street is ever without blemishes, and this week’s rally in the tech-heavy Nasdaq Composite is proving no exception. In fact, several unmistakable bearish signals have surfaced that merit serious consideration from investors betting big on the artificial intelligence trade. According to BTIG tech strategist Jonathan Krinsky, the closely watched Philadelphia Semiconductor Index, or SOX, remains 14% below its June peak—and within that benchmark, only three constituents are trading closer to their own all-time highs than the index itself. Those three names are Advanced Micro Devices (NASDAQ: AMD), Nvidia (NASDAQ: NVDA), and Taiwan Semiconductor Manufacturing (NYSE: TSM).
Digging deeper, ten of the SOX’s thirty components have pulled back more than 30% from their 52-week highs, with GlobalFoundries (NASDAQ: GFS), KLA Corp (NASDAQ: KLAC), and ON Semiconductor (NASDAQ: ON) leading the decline—each down over 40%. The average drawdown across all SOX members currently stands at a steep 26%. Krinsky warns that this setup echoes the aftermath of the initial 2000 market downturn, when numerous semiconductor stocks printed fresh highs while the underlying index failed to follow suit.
The divergence is not confined to chips alone. The S&P 500 is also exhibiting troubling internals: even as the broad benchmark flirts with record territory, for five consecutive sessions the number of stocks logging new 52-week lows on an intraday basis has outpaced those hitting new 52-week highs. Over the past month, the S&P 500 has gained 1.2%, yet nine of its eleven sectors have closed lower.
All of these developments lurk beneath the surface of the Nasdaq Composite’s streak of record closes this week. The historic run has been fueled by Meta’s launch of Muse, which has driven widespread adoption among both consumers and enterprises. That enthusiasm has validated the hefty capital expenditure plans of big tech, triggering a broad re-rating across the entire AI ecosystem. Semiconductor giants have further propelled the advance, with multi-day gains pushing Advanced Micro Devices (NASDAQ: AMD) toward the trillion-dollar market cap threshold.
Krinsky adds: “The momentum in tech right now is so strong that fighting it with short positions is exceedingly difficult. But we cannot ignore the extreme dispersion in the market, and a growing number of indicators are drawing comparisons to the dot-com era of 2000. In the near term, expect continued choppy, back-and-forth trading—yet from a medium-term perspective, we remain cautious.”
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