The Bear Market in Semiconductors Is Just Beginning
Just when you think a stock can never fall again... it usually does.
Anyone who has been watching the semiconductor sector in recent months will know exactly what I'm talking about...
Semiconductor stocks have soared this year. Investors believe we're in the early stages of a multiyear AI-infrastructure build-out rather than a short-lived spending cycle.
You see, the largest tech companies are spending hundreds of billions of dollars building AI data centers, which require tens or even hundreds of thousands of microchips.
And it's not just graphics processing units ("GPUs") in these data centers... It's high-bandwidth memory, networking chips, optical interconnects, and power-management chips.
Almost every part of the semiconductor ecosystem benefits from the AI build-out. Gartner now expects global semiconductor revenue to surpass $1.3 trillion in 2026, up 64% compared with 2025. And AI chips are projected to account for roughly 30% of industry sales.
As a result, investors have been pouring into semiconductors. In fact, semiconductor funds have seen a record $46 billion in inflows this year...
Based on all of this, semiconductor stocks probably seem like the trade of a century. But nothing moves upward in a straight line forever...
Semiconductor stocks have pulled back in recent weeks. In fact, the PHLX Semiconductor Sector Index recently entered bear market territory when it fell more than 20% from its previous high. Take a look...
So folks who bought semiconductor stocks over the past month – thinking they were hopping on a rocket ship to quick profits – are now in the hole.
To be fair, semiconductor stocks may run higher from here over the long term. But I don't think the selling is done yet in the short term.
The reason I say that is because of my new StockTracker tool. My team and I have been developing and perfecting this system for a while now.
It uses relative strength and momentum to anticipate when sectors like utilities, real estate, and communications services – along with individual stocks and industries – are poised to begin outperforming the overall market. And, crucially, it also predicts when market leaders are about to topple...
The State Street SPDR S&P Semiconductor Fund (XSD), which invests in semiconductor stocks in equal weight, hit an all-time high in June. Then, just a few weeks later, XSD went into what I call "bearish" territory in my StockTracker.
If you had used my system at the time, you could've seen the 20%-plus drop in semiconductor stocks coming before it happened... and taken your profits.
And according to StockTracker, XSD is still in bearish territory. My system shows that XSD has a long way to go until it's officially in "bottoming" territory. So we don't think a bottom is in for semiconductor stocks just yet.
It may be weeks or even months before XSD makes it back into my system's "buy zone."
Fortunately, if you have access to StockTracker, you'll know exactly when to get back into the semiconductor trade. That way, you can maximize your gains once the next big rally kicks off.
To hear all the details about my new system and how it works, click here. Today is the last day you can check this out.
What We're Reading...
- Something different: The World Cup audience stayed bipartisan despite President Donald Trump's prominent role, a CNBC survey finds.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 22, 2026