The SOX index's recent decline, now approximately 40% below its June 22 peak, reflects a broader sell-off in semiconductor and AI sectors. This shift has led to skepticism among investors regarding the potential returns from substantial data center expenditures.
Jonathan Krinsky, chief market technician at BTIG, noted that while historical patterns show potential for rebounds after similar breaks, the long-term outlook is less optimistic, with only 44% of instances resulting in positive returns after 50 days.
The average return during these periods has been negative, suggesting that many investors who entered the market between May and October are currently facing losses. Krinsky emphasized the challenge of overcoming the overhead supply created by these underwater positions, indicating that a return to the April breakout point of 8,000-8,300 is necessary to fully retrace the previous gains