BTIG warns semiconductor stocks face prolonged decline risk

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BTIG warns on chip stocks

Highlights

BTIG advises investors to use potential rebounds in semiconductor stocks to cut exposure, warning of a likely prolonged sector decline amid rising AI doubts.
The Philadelphia Semiconductor Index (SOX) fell 11.4% last week, its worst weekly drop since April 2025, while SOXX ETF recorded nine consecutive daily losses.
BTIG identifies $490 as key SOXX support; a breach could lead to $468, with counter-trend rallies seen as opportunities to sell rather than as recovery signals.

Semiconductor selloff signals deeper market stress

As reported by CNBC, BTIG says investors should use a potential rebound in semiconductor stocks to reduce exposure ahead of what it describes as a longer drawn out decline. In a research report published Sunday, the firm points to growing doubts around the artificial intelligence segment and weakness that it says is spreading beneath the broader market's surface.

BTIG managing director and chief market technician Jonathan Krinsky writes that more doubts are creeping into the AI complex, adding that history suggests early warning signs can precede a more serious deterioration. The Philadelphia semiconductor index, or SOX, falls 11.4% last week, marking its worst weekly drop since April 2025, while the iShares semiconductor ETF, SOXX, records nine straight daily losses.

Krinsky says a relief rally remains possible, but historical data offers limited confidence that any bounce would be durable. After prior weeks in which the SOX dropped at least 10%, the index rose the following week 43% of the time, with an average return of 1.7% and a median return of negative 1.7%; after three weeks, returns were positive in only 60% of cases.

Support levels and broader market implications

BTIG also questions whether investors should draw comfort from the S&P 500's relative resilience. Since June 1, nine of the index's 11 sectors have posted declines of at least 9% from their respective peaks, even as the benchmark's maximum drawdown stands at 5%.

For investors seeking to reduce semiconductor exposure, the firm identifies about $490 as a key support level for SOXX. A move below that level could open the way for a decline toward the ETF's 200-day moving average near $468, and BTIG says even a counter-trend rally would likely represent a selling opportunity rather than a lasting recovery.

In our earlier article on Micron Technology’s weakening technical setup, we noted that the stock broke below a rising wedge on the weekly chart, a pattern that often signals a rally is losing steam. We also highlighted softening momentum indicators and mapped key support and resistance zones that could define the next leg lower if sellers stay in control.

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