BTIG technology strategist Jonathan Krinsky said the Philadelphia Semiconductor Index remains 14% below its June high, and only three of its constituents are down less than the index overall. According to Sina Finance, those three companies are Advanced Micro Devices (AMD), Nvidia (NVDA), and TSMC (TSM).

Krinsky also said 10 of the SOX index's 30 constituents are more than 30% below their 52-week highs, with GlobalFoundries (GFS), KLA (KLAC), and ON Semiconductor (ON) among the biggest decliners, each down more than 40%. He added that the average drawdown for SOX constituents is 26%.

Krinsky said the S&P 500 has also shown market divergence, with more stocks hitting 52-week lows intraday than 52-week highs for five straight trading days, even as the index nears record territory. He said the S&P 500 has risen 1.2% over the past month, while nine of its 11 sectors have fallen.

He said the Nasdaq Composite's record highs this week have masked these signs. Krinsky said the rally has been driven by broad adoption of Meta's Muse after its launch, which has led investors to accept higher capital spending by technology companies and revalue the broader AI ecosystem.

Krinsky added that the strength in technology shares makes shorting difficult, but he warned against ignoring the extreme divergence. He said more indicators are starting to resemble the dot-com bubble era, and that the market is likely to remain range-bound in the short term, while he stays cautious over the medium term.