The hot run in tech stocks now appears too hot for many rational investors.
The insight: Semiconductor stocks as measured by the Philadelphia Semiconductor Index (^SOX) are now up 246% over the last 14 months, according to Creative Planning chief market strategist Charlie Bilello. That now surpasses the 234% surge seen at the peak of the dot-com bubble.
Leading the way in the SOX this year are monster runs for Micron (MU) and Intel (INTC). We all know how the late 1990s ended up for tech investors!
“The AI mania has taken semis to a place only seen once before. History doesn’t repeat, but extremes tend to rhyme,” Bilello cautioned.
Why tech stocks are being rattled: The tech sector has battled through a sharp bout of volatility over the past week as investors have aggressively rotated out of high-flying AI names — a majority of which are housed in the SOX.
The Nasdaq Composite (^IXIC) has dropped in four of the past five trading sessions. It has moved at least 1% for six straight trading days.
The sudden cooling in the appetite to own tech has been largely triggered by a mix of heavy profit-taking and fresh macroeconomic anxiety, especially after the Federal Reserve signaled that it might keep interest rates higher for longer to aggressively combat sticky inflation.
“With Micron (MU) set to report earnings this Wed there is some added nervousness on the important memory chip trade and along with technical triggers is adding to some nervousness among tech investors,” Wedbush tech analyst Dan Ives wrote in a note. “Taking a step back we continue to believe that in this market we will continue to go through a number of ‘gut check moments’ in the tech trade as the AI Revolution remains in the 3rd inning … this morning is just another one of those moments.”
The bottom line: The buy-the-dip mindset on hot tech stocks is currently being challenged. And judging by the chart above, that looks like the right thing to be doing right now.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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