Semiconductors Signal AI Bubble Risks, Essaye Warns
Sevens Report highlights divergence between SOX and S&P 500
What happens to the stock market when the AI bubble bursts?
A lack of ROI and diminishing returns in artificial intelligence make its bubble a question of when, not if, according to Sevens Report Research founder Tom Essaye. He pointed to semiconductor stocks as the “canary in the coal mine” for the AI trade.
In a recent client note, Essaye highlighted that the PHLX Semiconductor Index (SOX) remains below its July 2024 highs, even as the S&P 500 gained more than 10% in the same stretch.
“The takeaway here is that if AI remains the primary source of bullish optimism for a continued rally in the broader stock market in the months and quarters ahead, this market is in trouble and at risk of rolling over sooner than later as the SOX should still be leading the market higher like it was in 2024, not lagging considerably over the last 12 months,” he wrote.
Essaye cautioned that if the SOX begins to materially sell off, the S&P 500 will likely follow.
Also, click here to view the full article on Livewiremarkets.com published on August 13th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.
If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.
To strengthen your market knowledge take a free trial of The Sevens Report.
Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.
