Recent weakness in semiconductor stocks has fueled fears that the broader bull market is beginning to unravel, but the latest Chart of the Week from Global Markets Investor argues that the damage has been far more concentrated than headlines suggest.
According to the report, the sharp pullback has been largely confined to AI-related and semiconductor stocks rather than the broader equity market. While chipmakers have endured one of their toughest stretches in more than a year, most stocks continue to hold above key long-term technical levels, indicating that the underlying market remains relatively resilient.
The report highlights several signs that the broader market has remained intact despite the recent volatility:
- Around 53% of stocks are still trading above their 200-day moving average, a level that historically has not been associated with broad bear markets.
- Approximately 72% of stocks are higher over the past month, while nearly 80% have gained over the last three months, suggesting positive momentum remains widespread.
- The Philadelphia Semiconductor Index (SOX) has fallen sharply in recent weeks, but it is still significantly higher for the year, reflecting a correction after an exceptionally strong rally rather than a full trend reversal.
Rather than exiting equities altogether, investors have been rotating into other sectors. Money has flowed into energy, real estate, financials, healthcare, and consumer staples, helping cushion the broader market even as technology stocks have come under pressure. That shift reflects a changing leadership dynamic rather than widespread risk aversion.
The report also notes that market sentiment has been weighed down by growing concerns over whether the enormous capital spending on AI infrastructure will generate sufficient returns. Those worries have triggered profit-taking in many of this year’s biggest winners, particularly semiconductor companies, even as corporate earnings and economic data remain relatively supportive.
For investors, the takeaway is that the recent selloff appears to be a sector rotation rather than the start of a broad market collapse. While volatility in AI and semiconductor stocks could persist, the broader market’s internals suggest the bull market remains on firmer footing than headline declines might imply.
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