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Semiconductors Signal AI Bubble Risks, Essaye Warns

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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.

Sevens Report’s Tom Essaye Flags Bubble Risk in AI-Driven Rally

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Semiconductor weakness signals possible cracks in AI trade

AI-Driven Market Rally Raises Bubble Concerns: Strategist Warns of Potential Warning Signs

Tom Essaye of the Sevens Report warns that the AI-fueled stock market rally may be unsustainable, as semiconductor stocks lag the broader market.

While the S&P 500 is up nearly 14% since July 2024, the PHLX Semiconductor Index has barely broken even, raising questions about the rally’s foundation. Essaye also notes slowing U.S. job growth and rising jobless claims, cautioning that bubbles often burst in late economic cycles — with a recession posing a major risk to AI-driven gains.

Also, click here to view the full article published in AInvest.com on August 9th, 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.

Semiconductors: Bull vs. Bear Case (Important for the Market)

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Semiconductors: Bull vs. Bear Case: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Semiconductors (SOX): Bull vs. Bear Case

Futures are modestly higher and are extending Thursday’s gains following a mostly quiet night of news.

Most of the early rally this morning is due to momentum from Thursday’s surge in stocks, but Taiwan Semiconductor (TMSC) also gave a positive July revenue update which is boosting tech/AI sentiment and supporting markets.

Geo-politically, a retaliatory attack from Hezbollah and/or Iran on Israel remains imminent and we shouldn’t be shocked if geo-political risks rise over the weekend.

Today there are no notable economic reports nor any Fed speakers so trading should be driven by technical factors and the yen, and as long as the yen doesn’t rally, stocks should be able to hold Thursday’s gains.

Join thousands 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.

Tom Essaye Quoted in SP Global on August 5th, 2022

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Hiking rates, Fed attempts to strike a risky balance

Hiking fed funds to 4%, 5% or higher won’t make semiconductor factories in Asia run more consistently, nor will it deter the Chinese from future lockdowns. Tom Essaye, a trader and founder of financial research firm Sevens Report Research, wrote. Click here to read the full article.

Are Semiconductors A Buy?

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What’s in Today’s Report:

  • Are Semiconductors A Buy?

Futures are little changed following a quiet night of news.

Economic data was mixed as final May manufacturing PMIs were in-line with expectations for the EU and UK, although German Retail Sales missed estimates (–5.4% vs. (E) -0.1%).

On the Fed front, Bostic said his comments about a “pause” on rate hikes shouldn’t be interpreted that the Fed will help rescue volatile markets.

Today focus will be on economic data and Fed speak via the ISM Manufacturing PMI (E: 54.5), JOLTS (E: 11.40M) and comments by Williams (11:30 a.m. ET) and Bullard (1:00 p.m. ET).  Bottom line, the ideas of slowly moderating (but not collapsing) growth and the possibility for a Fed “pause” in rate hikes in late summer/early fall have helped stocks rally, and as long as today’s data and Fed speak don’t refute those possibilities, stocks can extend the recent rally.