A one-day wipeout of this magnitude feels dramatic, but it doesn't automatically mean the AI and semiconductor story is broken. The sector had become one of the most crowded trades in the market, with valuations pricing in near-perfect execution and years of continued AI spending growth.
The key question isn't whether stocks bounced 5-6% after hours. The key question is whether hyperscalers continue spending aggressively on AI infrastructure over the next 12-24 months. If that remains intact, this could prove to be a healthy reset that shakes out leverage and speculative excess.
That said, falling 15-30% in a day is often a sign that forced selling and deleveraging are occurring. Those events can take time to fully unwind, and sharp relief rallies are common even during larger corrections.
My approach would be to scale in gradually rather than trying to call the exact bottom. If the long-term AI thesis remains intact, quality names may look attractive after the dust settles. If spending expectations start to weaken, this may be only the first leg lower.
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