SpotGamma’s Brett Pachuba said positive developments from Meta or Alphabet could trigger a sharp rally, particularly if investors are underinvested.
- Carson Group’s Ryan Detrick described the rotation away from technology as potentially healthy.
- U.S. Bank Wealth Management’s Rob Haworth pointed to relatively contained credit stress and corporate earnings expectations as potential support for the broader market.
- Pachuba said the semiconductor sell-off began before the latest Anthropic valuation report, reflecting broader questions about AI monetization and data-center revenue.
The sell-off in technology and semiconductor stocks extended in early morning trade on Friday, and market strategists cautioned that investors could miss out on a potential rebound in AI shares if they turned too bearish.
“I still believe that there there remains a real right tail risk in this market where if you are underinvested to the upside, and we get positive news out of say a Meta or a Google… then there could be a real strong upside chase into a part of the year that has really strong seasonals,” Brett Pachuba of SpotGamma said in an interview with CNBC. “So I do think investors really have to watch out as they kind of step into this bearish mode here.”
VanEck Semiconductor ETF (SMH) dropped around 1% in pre-market trade on Friday, while the iShares Semiconductor ETF (SOXX) fell around 1.3%. The S&P IT sector tracking Technology Select Sector SPDR Fund (XLK) also extended its decline, down 0.3% in pre-market trade.
On Stocktwits, retail sentiment around SOXX improved to ‘bullish’ from ‘neutral’ over the past day, while sentiment around XLK dipped to ‘neutral’ from the ‘bullish’ zone. SMH saw retail sentiment continue to trend in ‘bullish’ territory.
Market Breadth Offers A Counterpoint To Tech Weakness
Ryan Detrick of Carson Group, stated that the rotation away from technology as a potentially healthy development rather than a sign that the broader market was breaking down.
According to the analyst, advancing stocks outnumbered decliners across the S&P 500, with sectors such as healthcare and financials also showing strength. He said that broader participation suggests the market’s weakness has not been confined to a single direction, even as technology stocks have come under pressure.
Detrick said investors could use the pullback to rebalance their portfolios rather than abandon the sector. “You have to take the opportunity to rebuild your portfolio and build that diversification of the things that have been weaker. And right now, that’s been tech,” he said.
Earnings Expectations Could Support Stocks Into Year-End
According to Rob Haworth of U.S. Bank Wealth Management, credit-market conditions also offered some reassurance. While riskier borrowers have faced more pressure, he said stress remained concentrated among lower-rated companies rather than spreading broadly across the credit market.
Haworth pointed to corporate earnings as a potential source of support, citing expectations for strong third-quarter growth and further gains in 2026. According to him, the earnings outlook could help the S&P 500 reach new highs by the end of the year.
Detrick echoed a similar sentiment, pointing to historical performance after U.S. midterm elections as another reason not to turn overly bearish on equities.
AI Concerns Extend Beyond Anthropic
Their comments came after a Reuters report said Anthropic’s valuation had fallen to $1.5 trillion from $2 trillion in discussions with investors ahead of a potential initial public offering. The report came amid weakness in semiconductor stocks, concerns in credit markets and a rotation into other sectors.
“Anthropic is a story, but the whole sector in terms of the ability for AI to make money and data center revenues is much bigger than just Anthropic,” Pachuba said.
The analyst pointed to a roughly 15% decline in semiconductor stocks since the previous week, following news that Chinese memory chipmaker CXMT was accelerating production. He also noted that the recent weakness in semiconductor stocks had preceded the latest Anthropic-related selling.
According to Pachuba, recent market moves had shown stronger upside volatility, leaving open the possibility of a forceful rebound if sentiment shifts.
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