Distinguished finance professor Jeremy Siegel said Friday’s decline in the technology sector was a common reaction to a parabolic rise in stock prices. But he was also optimistic that such declines usually do not signal the beginning of a long correction. “One of the oldest sayings on Wall Street is take the stairs up, take the elevator down, and that’s exactly what happened,” Siegel, professor emeritus of finance at the Wharton School of Business at the University of Pennsylvania and chief economist at WisdomTree, said on CNBC’s “Closing Bell” Friday afternoon. “When you have super moves like we’ve seen with chip stocks, memory stocks, trend followers, momentum players, every time they go out of trend, they’re out because they’re just riding that train. That’s what we’re seeing today,” he said. The average price of all three major stocks fell this week, with the Nasdaq dropping 4.7%, its worst weekly decline since April 4, 2025. Still, despite this pullback, the Nasdaq is still up 10.6% in 2026. As Siegel noted, semiconductor stocks have been big winners this year, with the VanEck Semiconductor ETF (SMH) up 58% year-to-date, even as stocks have mostly fallen. It’s down 5% this week. Friday’s 9.2% decline was the worst single-day price move since January 27, 2025. Friday was the worst day for the iShares Semiconductor ETF (SOXX) since March 16, 2020. SOXX is up over 79% since the beginning of the year. But Siegel said big moves like this are not unusual. “Now it rarely comes out on top,” he said. “It can be a ceiling, but it’s usually a very short-term ceiling. It goes down and then tries to go up. And that’s the point where it breaks out of the previous high. Otherwise, it could be the start of a bigger decline, but this is…a very common reaction to a parabolic move.” According to Siegel, market gains from artificial intelligence are different from previous market bubbles because of the potential productivity gains these technological changes create. The professor likened these possible social effects to the industrial revolution. “Again, we all emphasize that this is a completely different situation. This AI revolution and ‘Mag Seven’ is a situation unlike anything we have seen before,” he said. It’s unclear what prompted Friday’s chip sale. Broadcom’s failure to raise its AI chip outlook on Wednesday soured sentiment, but Friday’s selling momentum was worse than what occurred immediately after that news. Siegel also cautioned that these parabolic price increases only make sense if companies can continue to permanently inflate their profits. “Remember, you can only double the price if profits continue to rise. Double forever. If this spikes in three or four years and then falls, you’ve gone too far with these chip stocks here,” he said. “Be wary of temporary spikes in profitability…chips are historically cyclical.”
