Semiconductor stocks hit highest RSI since Dot-com bubble, sparking correction fears amid AI chip demand surge

Semiconductor stocks tracked by the PHLX Semiconductor Index have reached a weekly Relative Strength Index (RSI) of 85.54, the highest since the Dot-com bubble era, signaling extreme overbought conditions. This surge is driven by booming demand for AI chips and massive spending on AI infrastructure, with hyperscalers set to invest $700 billion this year. However, concerns about a potential market correction are rising due to risks like diminishing returns, energy constraints, and uncertain profitability timelines. While some investors warn of a bubble similar to the late 1990s, others highlight strong earnings and real demand supporting the sector, suggesting any pullback may be a healthy pause rather than a crash. Upcoming earnings and economic factors will influence near-term market direction.