History Points to Further Chip Stock Losses After Worst Week Since 2025

BTIG advised investors to trim their positions during any recovery in chip equities. The brokerage predicts a protracted slump for the industry that could continue into 2027.

The recommendation came after the Philadelphia Semiconductor Index (SOX) dropped 11.4% in a single week, its sharpest decline since April 2025. At the same time, the iShares Semiconductor ETF (SOXX) has declined for nine consecutive trading days. Nonetheless, it remains up by nearly 64% so far in 2026.

Historical Patterns Offer Little Solace to Chip Stock Optimists

BTIG head market technician Jonathan Krinsky made the case in a Sunday research report. He highlighted rising skepticism concerning 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 foresees a short-term bounce but is skeptical it will persist. In past cases where SOX lost 10% or more in a week, the index gained the next week 43% of the time. The mean increase in that week was 1.7%, but the median result was a 1.7% loss. After three weeks, the index was higher in only 60% of cases.

For investors reducing holdings, BTIG highlighted roughly $490 as a key support level for SOXX. A break below that could push the ETF toward its 200-day moving average around $468. BTIG also warned against taking comfort from the S&P 500’s relative stability. Since June 1, nine of the S&P 500’s 11 sectors have dropped at least 9% from their peaks. The index itself has fallen by no more than 5% over that period.

Dalio, Panmure Liberum and the IMF Issue Similar Caution

BTIG’s semiconductor call joins a growing list of AI bubble warnings from investors and policymakers in October. Earlier in the month, Bridgewater founder Ray Dalio said the AI bubble was approaching its high point. Panmure Liberum’s Joachim Klement also sees the AI trade breaking down by 2027 or 2028. The IMF followed on October 13, naming an AI-driven market correction as one of three important risks to global financial stability in its latest report.

“The consequences of an AI correction could be global, with some jurisdictions more sensitive than others,” it read.

The IMF also noted rising leverage connected to AI, pointing to circular financing where hyperscalers fund weaker AI companies in exchange for future revenue promises. Both BTIG and Panmure Liberum view 2027 as a period for deeper losses. In the near term, SOXX’s $490 level will show whether investors are following that guidance.