BTIG warns: semiconductor decline may be delayed until 2027

According to Woofun AI, BTIG's chief market technical analyst Jonathan Klinsky issued a stern warning advising investors to take advantage of any rebound in the semiconductor sector to quickly reduce their positions, as the industry's downward cycle is expected to continue until 2027.

This judgment stems from the market's growing doubts about the valuation logic of artificial intelligence. Klinsky pointed out that although current concerns may eventually prove to be a false alarm, historical rules indicate that “where there is smoke, there is often fire,” and a short-term technical rebound is difficult to reverse long-term structural pressure.

The Philadelphia Semiconductor Index (SOX) recently experienced a sharp drop, falling 11.4% in a single week, setting the record for the biggest weekly decline since April 2025. Meanwhile, the iShares Semiconductor ETF (SOXX.US) has recorded a decline for 9 consecutive trading days, although its cumulative increase in 2026 is still close to 64%.

According to data compiled by Woofun AI, historical backtesting reveals a typical path after such sharp fluctuations: when the SOX index falls by 10% or more, in the case of 43%, the index rises in the following week, with an average increase of 1.7%, but the median performance falls 1.7%.

The more critical variable is the medium-term trend. The data shows that after three weeks, the index will only rise in 60% of cases, which means that the short-term rebound is extremely unsustainable. If investors try to bottom out, they face a probable medium-term downside risk.

Looking at the technical structure, BTIG sees $490 as a key support level for SOXX, and once this line of defense falls, the ETF price is likely to drop further to the 200-day moving average around $468.

Notably, the relative stability of the S&P 500 index is extremely deceptive. Since June 1, the stock prices of 9 of the 11 industries that make up the index have fallen at least 9% from their peak, while the S&P 500 itself has never fallen more than 5%.

This internal structural deviation warns investors that the stability of the macro index has overshadowed the bearish arrangement of underlying assets. The fragility of the semiconductor sector is being amplified through industry differentiation, and any blind optimism about market stability may ignore systemic risks at the individual stock level.

BTIG's findings are not an isolated opinion; they are part of the world's top institutions' consensus on the risk of the AI bubble since this month. Bridgewater Foundation founder Ray Dalio clearly warned at the beginning of this month that the AI bubble is about to burst; Panmure Liberum's Joachim Clement believes that AI-related transactions may worsen as early as 2027 or 2028. On October 13, in its latest financial stability report, the International Monetary Fund listed market pullback caused by artificial intelligence as one of the three major risks threatening global financial stability, and specifically pointed out that this correction may have a global impact, and some regions will be more affected. The report also highlights rising leverage ratios associated with artificial intelligence and a revolving financing model where large technology companies provide financial support to less powerful AI companies in exchange for future revenue commitments. As 2027 is viewed by many institutions as the point of a sharp decline in the market, whether SOXX can maintain the level of 490 dollars in the short term will be a key litmus test for whether the market has accepted this severe reality.