BTIG is telling clients to use any rebound in semiconductor stocks to trim exposure, warning that the sector's slide could run into 2027. The call came after the Philadelphia Semiconductor Index fell 11.4% in a week — its steepest weekly drop since April 2025 — and the iShares Semiconductor ETF slipped for nine straight sessions.
Even with that run of losses, SOXX is still up nearly 64% in 2026. That gap between a rough stretch and a strong year is exactly what BTIG is pointing to: the firm thinks the pullback has room to go.
The smoke signal in the AI complex
Jonathan Krinsky, BTIG's chief market technician, cited growing doubts about the AI complex. He said history suggests that where there's smoke there's often fire. The firm's expectation is a drawn-out decline in chip stocks rather than a quick dip and recovery.
The historical record offers a mixed picture. After past weekly SOX losses of 10% or more, the index rose the next week 43% of the time, with an average gain of 1.7% — but a median loss of 1.7%. Three weeks out, it traded higher in just 60% of cases. In other words, the bounce isn't reliable enough to bet on.
The $490 line for SOXX
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. That's the next technical marker the firm is watching, and it's not far from current levels.
The broader market has already been thinning out beneath the surface. Since June 1, 9 of the S&P 500's 11 sectors have fallen at least 9% from their peaks, while the index itself has dropped no more than 5%. That kind of divergence — most sectors down sharply while the headline index holds up — suggests the weakness isn't confined to chips.
Others are ringing similar alarms
BTIG isn't alone in its caution. Bridgewater founder Ray Dalio said earlier this month that the AI bubble was nearing its bursting point. Panmure Liberum's Joachim Klement sees the AI trade breaking down as soon as 2027 or 2028. Both BTIG and Panmure Liberum point to 2027 as the window for deeper losses.
The International Monetary Fund's October 13 financial stability report named an AI-driven market correction as one of three salient risks to global financial stability. The IMF warned that the consequences of an AI correction could be global, with some jurisdictions more sensitive than others. It also flagged rising leverage tied to AI, including circular financing where hyperscalers fund weaker AI firms in exchange for future revenue commitments.
What to watch from here
The immediate test is whether SOXX holds above $490. A break below would put the 200-day moving average near $468 in play, and that's the level BTIG's technical read hinges on. Beyond the chart, the sector's next move will depend on whether the doubts Krinsky describes keep spreading — or fade as they have after past weekly drops of this size.
For now, BTIG's advice is straightforward: treat rallies as chances to reduce exposure, not as the start of a recovery. The firm expects the decline to stretch into 2027, and it's not the only voice pointing to that year.
