Key Takeaway
With the conflict in Iran appearing to wind down, markets are once again focused on the longer-term outlook for AI and semiconductor growth. A month after the Middle East conflict began on February 28th, the S&P 500 had already recovered its losses and turned decisively bullish. By March 15th, the index had moved above its 20, 50, and 200-day moving averages and even reclaimed its pre-conflict highs.
Much of that recovery has been driven by technology. While every other major sector suffered losses over the past three months, technology is up 23%, a striking divergence. Does this kind of outperformance signal trouble ahead?
From a technical standpoint, the S&P 500 briefly dipped below its 20-day moving average on Friday, June 5th and came close to testing the 50-day average. The move was driven mainly by a selloff in high-flying semiconductor stocks as investors scrutinized revenue expectations. However, the dip was shallow, and the RSI quickly bounced back into bullish territory. More importantly, the longer-term trendlines established before the conflict still point higher from current levels, suggesting there’s still room to run.
Recent market action may have less to do with a bubble deflating and more to do with investors making room for new opportunities. SpaceX’s IPO last Friday raised $85 billion, making it the largest in history. Anthropic and OpenAI are also expected to go public in the fall of 2026 and could be even larger. Some of the recent profit-taking in semiconductors likely reflects investors raising cash ahead of these massive new listings.
Despite the short-term tremors, the technical picture remains constructive. The RSI is back in bullish territory and the broader uptrend is intact. Large IPOs of this scale are bound to create some volatility as they enter an already hot technology sector, but that doesn’t necessarily mean the bull market in AI-related stocks is over.
