Investors who believe the artificial intelligence (AI) boom can only go one way may need to think again.
BTIG, the financial services and research firm, is warning that growing weakness in technology shares could signal deeper problems for a market that has become heavily dependent on expectations of continued AI-driven growth.
Warning
The warning follows a sharp sell-off in semiconductor stocks. The Philadelphia Semiconductor Index fell 11.4% in the previous week, its worst weekly performance since April 2025.
Meanwhile, the iShares Semiconductor ETF reportedly suffered nine consecutive daily losses. For BTIG’s chief market technician, Jonathan Krinsky, these developments raise questions about whether the weakness is simply a temporary correction or the beginning of a more prolonged downturn.
Smoke and Fire
The expression ‘where there’s smoke, there’s fire’ captures the concern. Falling share prices do not necessarily mean that the AI investment boom is ending, but they can indicate that investors are becoming less confident about the returns that enormous technology investments will ultimately deliver.
Billions of pounds and dollars are being committed to data centres, advanced processors and supporting infrastructure. Technology companies are spending aggressively to establish themselves as leaders in AI.
However, the crucial question is whether the resulting revenues and profits will justify the expenditure and the lofty valuations attached to many of these businesses.
There is also a wider market concern. The performance of major U.S. indices can disguise significant weakness among individual companies and sectors.
If semiconductor shares continue to struggle, pressure could spread to other technology stocks and weigh on the Nasdaq and S&P 500.
BTIG
BTIG has identified important technical levels for the semiconductor ETF, including support around $490 and its 200-day moving average near $468.
A sustained break below these levels could reinforce concerns about further losses, although neither level guarantees where prices will stop falling.
Investors should also remember that a sharp decline can create opportunities. If AI demand remains strong and companies demonstrate that their investments are generating healthy profits, technology shares could recover.
Earnings watch
Equally, if earnings disappoint or spending proves excessive, valuations may have further to fall.
The warning deserves attention, particularly after a period in which enthusiasm for AI has helped support stock market valuations.
Investors should examine earnings, cash flow, capital expenditure and the broader health of the market rather than relying solely on headline index performance.
BTIG is not necessarily predicting an imminent crash. Its message is that the warning signs should not be ignored.
Whether the smoke signals a temporary setback or a more serious problem will depend on what happens next to corporate profits, AI spending and investor confidence.