Semiconductor ETF surges 6.9% as tech stocks rebound from selloff

US tech stocks staged their biggest rally in months, with the Semiconductor ETF surging 6.88% as traders bought the dip after a historic momentum crash.

The iShares Semiconductor ETF jumped 6.88% on Thursday, leading a broad tech rebound that lifted sector funds by at least 5.5%.

"Some reprieve is in order after the largest and fastest momentum crash in modern history, but we caution that this bounce could be a head-fake," said Jonathan Krinsky, chief market technician at BTIG, in a note to clients.

The rally followed a brutal stretch that saw the PHLX Semiconductor Index slide 5.3% on Wednesday, bringing its drawdown to 29% from a June 2 record close. The Nasdaq Composite had logged six consecutive declines through Wednesday, its worst losing streak since April 2024, and came within a percentage point of a 10% correction. The Dow Jones Industrial Average rose 1.03% on Tuesday, while the S&P 500 added 0.21%.

The question for investors is whether Thursday's surge marks a genuine reversal or a bear-market rally. Krinsky warned that a 20% bounce in the SOX would bring it back to its 50-day moving average, where it would "likely fail again" before eventually testing its 200-day moving average — a pattern that echoed the aftermath of the dot-com peak in 2000, when the index surged 37% after a 35% plunge before resuming its decline.

Momentum Crash in Historical Context

The rebound comes after what BTIG described as the MS Sector-Neutral Momentum Index's worst four-day decline on record at 17.4%, surpassing drops seen after the dot-com bust, the 2022 bear market and the post-Covid selloff. The Goldman Sachs High Beta Momentum Pair had fallen 23% below its 200-day moving average after trading 40% above that level in mid-June.

The sharp reversal in momentum stocks has been driven by growing concerns over artificial intelligence spending. Investors have questioned whether the massive capital expenditures by megacap technology companies to build out AI infrastructure will generate sufficient returns. Last week, Alphabet shares sank after the company raised its projected AI expenditures despite beating earnings estimates.

Earnings and Yields Add to Crosscurrents

The tech rebound unfolded against a complex backdrop of corporate earnings and rising bond yields. Meta Platforms reported softer-than-expected revenue guidance after the bell Wednesday and increased its 2026 expense outlook, sending its shares lower in premarket trading. Microsoft, by contrast, saw its shares rise after cloud growth and forecasts topped expectations. Apple and Amazon were scheduled to report after Thursday's close.

The 30-year Treasury yield touched 5.246% on Wednesday, its highest level since 2007, before pulling back. The 10-year yield stood at about 4.64% in recent trading, down from its peak near 4.72% on Thursday. Rising long-term yields have been a particular headwind for technology stocks, which derive a larger share of their value from future cash flows.

Oil prices added another layer of complexity. West Texas Intermediate crude fell 7.8% to $82.30 a barrel Monday and continued to decline, easing inflation concerns even as the US carried out strikes against Iranian military targets. Gold futures traded at $4,069.7 an ounce, up 0.43%, as investors sought haven assets. The pullback in oil helped push bond yields lower, providing some support for equities.

This article is for informational purposes only and does not constitute investment advice.