AI Correction Still Has Room to Run, Crypto Markets at Risk
BTIG's chief market technician, Jonathan Krinsky, has been warning about the semiconductor selloff and its impact on tech portfolios since May. He believes that the AI trade, which powered one of the most aggressive rallies in recent memory, still has room to correct further.
Krinsky estimates a potential 9-10% downside for tech stocks based on overbought conditions and the lack of broad market leadership. This correction is expected to affect not only semiconductor and AI-related stocks but also traditional tech equities.
The correlation between risk-on tech trades and crypto markets has been a persistent feature of this cycle, with institutional allocators treating crypto as part of a broader risk bucket. As they de-risk from overextended tech positions, the rebalancing tends to trim across correlated positions, including digital assets like Bitcoin and major altcoins.
For crypto-focused portfolios, if semiconductor stocks do have another 9-10% of downside, the spillover into risk assets could pressure Bitcoin and major altcoins even if nothing changes in crypto-specific fundamentals. Traders should be watching semiconductor breadth indicators and tech sector fund flows as leading signals for crypto market conditions.