'This Is Madness': Investors Chasing Chip Stocks At Risky Extremes

Josh Brown of Ritholtz Wealth Management said semiconductor stocks remain among the market's strongest performers but warned that extreme momentum has left the sector overextended in the near term.

Overbought Conditions Signal Near-Term Pullback

Brown told CNBC on Tuesday that "the space is overextended," noting that many semiconductor stocks have reached extreme momentum levels.

He pointed to high RSI readings—well above the typical overbought threshold of 70—across names like ON Semiconductor Corp. (NASDAQ:ON), STMicroelectronics N.V. (NYSE:STM), Intel Corp. (NASDAQ:INTC), Advanced Micro Devices, Inc. (NASDAQ:AMD), Marvell Technology, Inc. (NASDAQ:MRVL), and Texas Instruments Inc. (NASDAQ:TXN), adding that "professionals aren't pressing the buy button" at such levels.

"I saw people buying charts with 85, 86 RSI, um, and I just said, You know what? This is madness. Uh, people have to understand, even in an uptrend, you could get massive pullbacks along the way when things are this overbought," Brown said.

He said the recent pullback was "very common, very normal" after sharp gains and urged investors to let stocks cool off.

NVIDIA Stands Out But Still Faces Volatility

Brown said NVIDIA Corp. (NASDAQ:NVDA) is "probably the least of the overextended names," highlighting that the stock had consolidated for months before breaking out.

He expects it may retest breakout levels around 207–208 before potentially moving higher, but cautioned that even strong trends can see "massive pullbacks" when stocks become overbought.

Sector Extremes Reflect Broader Market Dynamics

Brown said semiconductor stocks tend to swing between extremes, either becoming highly overextended or deeply pessimistic.

He added that the sector remains central to broader market performance, with momentum in chip stocks closely tied to major tech names like Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL), and Apple Inc. (NASDAQ:AAPL), while warning that the market's rapid recovery leaves it vulnerable to short-term shocks.

Price Action

Shares of Nvidia edged up 0.11% to $213.40 in Wednesday premarket trading. Intel rose 2.53% to $86.66, while Advanced Micro Devices gained 1.17% to $327.00.

Texas Instruments added 0.69% to $266.83, STMicroelectronics climbed 2.69% to $51.15, and ON Semiconductor jumped 5.04% to $98.00. Marvell Technology also traded higher, up 1.70% at $155.83, according to Benzinga Pro data.

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