The broader stock market remains seemingly calm, but a brutal 20% semiconductor plunge has veteran strategist Ed Yardeni warning that high-flying tech equities have even further to fall.
While the S&P 500 is hovering securely around the 7,500 level—just 2.0% below its June 2 all-time high—momentum tech stocks are in freefall.
Tech Wreck Beneath the Surface
“The surface stayed calm while the engine broke,” Yardeni noted, highlighting the stark divergence between the broader market and the tech sector.
The ETF tracking the semiconductor index, iShares Semiconductor ETF (NASDAQ:SOXX), has plummeted 20.3% from its June 2 peak, officially entering bear market territory.
The damage is even more severe in hyper-growth momentum names. The Roundhill Memory ETF (BATS:DRAM), which skyrocketed from its April launch to peak at $80.72 on June 22, is down roughly 35% since then.
Margin Calls and AI Competition Trigger Selloff
According to Yardeni’s QuickTakes analysis, this violent tech correction is being driven by a sudden convergence of international pressures. Heavy margin calls on South Korean tech giants Samsung and SK Hynix Inc. (NASDAQ:SKHY) have severely weighed on U.S. memory chip and semiconductor equities in recent trading sessions.
Adding fuel to the fire, Chinese AI lab Moonshot recently launched Kimi K3, a massive 2.8-trillion-parameter open-weight model. The release, which Moonshot claims rivals top-tier models from OpenAI and Anthropic, has revived DeepSeek-era fears regarding AI commoditization.
Because of these cascading pressures, Yardeni is not calling the bottom just yet. He explicitly warned that the “S&P 500 Semiconductors stock price index is likely to fall another 12% to its 200-day moving average.”
Strategic Rotations: Financials and Healthcare
This aggressive selloff validates Yardeni Research’s earlier defensive posturing. The firm proactively downgraded the S&P 500 Information Technology sector to market weight on Dec. 7, 2025.
Instead of catching falling knives in the semiconductor space, Yardeni is advocating for a sector rotation strategy. The firm maintains an overweight rating on the Financials and Health Care sectors, which have successfully weathered the recent storm.
Yardeni emphasized that these traditional sectors are holding up well, buoyed by a booming investment banking environment and strong performance across the biotechnology industry.
Price Action in Tech and Broader Market
While the SOXX ETF has risen by 71.13% year-to-date, the S&P 500 and Nasdaq 100 indices have gained 8.94% and 12.29%, respectively. Meanwhile, the DRAM ETF has advanced by 95.26% since its listing in April.
Additionally, futures for the S&P 500, Dow Jones, and Nasdaq 100 indices were mixed in overnight trading, with Dow and S&P 500 futures falling and Nasdaq 100 futures advancing.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
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