Technology is back—and in emphatic fashion. Following a six-month lull, the sector has surged to new highs, powered by one of the most explosive semiconductor rallies on record. Since March 30th, the S&P 1500 Semiconductor group has jumped 36% in 18 sessions, a feat matched just eight times in over six decades. The semiconductor ETF (SOXX), which utilizes a different component weighting, has done even better, soaring 49%—a move exceeded only once, in November 2002.
The critical question to ask: does this kind of acceleration tend to persist, or mean-revert?
While the sample size is limited, history suggests that some degree of mean reversion may occur over the coming weeks. Notably, no signals emerged during the Dot-com Bubble prior to its March 2000 peak, with three signals emerging during the subsequent downturn. Remember, semis were not the dominant tech group during that period—internet stocks were.
This now marks the second signal in the current AI cycle. Following the last one in May 2025, semis initially weakened before resuming their rally.
We’ve featured this chart in prior Chart of the Week editions, but it warrants another look as the semiconductor-to-application software ratio has surged to 3.72—now approaching the record high of 3.9 set during the final phase of the Dotcom advance.
For perspective, we thought it would be useful to share a chart of the dominant group during the Dotcom era—Internet services. During its peak run in the 1990s, it recorded 15 instances in which its 18-day rate of change exceeded 36%, a level comparable to semiconductors today. On two occasions, the rate of change surpassed 80%, underscoring just how extreme that period became. While we do not expect semiconductors to replicate this type of price action given differences in market capitalization and share float, the chart serves as a reminder that when herd behavior converges on a trend, price dynamics can become extreme.
Each Chart of the Week highlights a theme, idea, or historic event that stood out to us. If you find it interesting, feel free to share it with friends or colleagues.
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