The Philadelphia Semiconductor Index surged again, setting a record with 18 consecutive days of gains—see just how overbought it is in this article.

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On Friday, boosted by Intel's better-than-expected earnings report, the SOX (Philadelphia Semiconductor Index) surged more than 4.3% in a single day, further fueling an already overly extended rally. As of now, the SOX has risen for 18 consecutive trading days, showing a vertical lift trend.

However, financial blog Zerohedge points out that behind the surge in U.S. semiconductor stocks, internal leadership is collapsing. This round of gains is driven by second-tier AI stocks and high-beta names, while MAG7 (the seven tech giants) have mostly been stagnant in recent days, and Nvidia is lagging behind. This is end-stage behavior:

When "generals" stop leading and the market starts chasing everything, the trade tends to be closer to exhaustion than expansion. There's still room for a short squeeze above, but the structure is shifting. This is where good trades become crowded trades. Squeezes do not die from bad news—they die when there is no one left to squeeze.

The current circuit-breaker rally in SOX can be described as epic: Price has already left the 200-day moving average far behind and is now pushing against the main upper trendline formed since last summer. Zerohedge notes the latest leg of gains has taken on a parabolic shape, and parabolic moves rarely end well.

SOX has risen for 18 consecutive trading days, adding at least $2.4 trillion in market value with several stocks posting historic gains (CRDO +95%, MXL +92%, ALAB +78%, MRVL +65%, SITM +60%, ON/AMD +50%). According to Goldman Sachs analysts, the market focus has clearly shifted from geopolitics to AI (and token economy), and critical earnings reports are about to arrive (STX, WDC, AMD). The threshold keeps rising, but in the current market style, stocks will be bought even if their earnings reports fail to meet unspoken expectations—as long as the logic for a long-term structural bull market remains intact.

Currently, SOX has reached overbought extremes: the deviation of semiconductor stocks from the 200-day moving average is the highest since June 2000. Zerohedge says now is the time to stop chasing delta and start thinking about convexity. In other words, it's time to set aside the delta mindset of chasing upward moves and instead use convexity logic to protect yourself—achieving asymmetric survival with limited cost.

Despite Friday's rise, on Thursday AIQ (AI theme ETF) recorded its largest single-day drop since the start of this circuit-breaker rally. Analysis says that if this proves to be a false breakout, it could mirror the pattern at the previous market lows—where extreme selling was punished by a subsequent squeeze-driven rebound. Now, chasing momentum at highs faces the same risk: if the market falls back, the result may be the same. The 200-day moving average sits much lower, so chasing momentum breakthroughs at the edge of the range is a money-losing game in the long run.

Despite bullish market sentiment, MAG7 has done nothing in the past few trading days. Our current trading price is the same as six trading days ago. MAG7 is still trapped in a huge choppy range. Since last September, buying at range highs has been a mistake. Will this time be different?

Whether year-to-date or since the recent low, the Russell 2000 has significantly outperformed the Nasdaq 100. The phenomenon of scrambling for low-quality stocks is playing out across the board. Is this a healthy market broadening, or a warning sign at the end of a cycle?

The rally in Russell 2000 technology stocks has reached an extreme level. The reversal of RSI is beginning to resemble the circumstances during the previous spell of equally overbought levels, but this time the surge since the low is even more aggressive, making the current situation more extended and potentially more fragile.

This month, Nvidia trailed SOX by about 18 percentage points (Nvidia +15%, SOX +33%), marking one of the biggest monthly underperformances in 20-plus years. According to Goldman Sachs, this is the third largest monthly lag ever recorded. While other stocks are being squeezed, Nvidia's lag is not confirmation... but a warning.

Early last week, even as the market continued to rise, volatility began to climb sharply, and the pattern of "spot up, volatility up" has persisted until now. Higher volatility has created a dilemma: with VIX and VXN at current levels and the market near record highs, hedging costs seem expensive, leading investors to do nothing and ultimately swim naked.

Zerohedge concludes this is no longer a pure AI bull market, but rather a liquidity-driven AI chase game—the higher the price, the more compelled buying, yet the leadership structure is cracking and risks are quietly accumulating beneath the surface.

Risk Warning and DisclaimerThe market is risky; investment requires caution. This article does not constitute personal investment advice, nor does it take into account any individual's specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions contained herein suit their particular circumstances. Invest at your own risk. ```