Gareth Soloway Says Semiconductor Weakness Is Testing the Market’s AI Leadership Trade

The headline this morning was DeepSeek. The bigger signal, according to Gareth Soloway, was the way the semiconductor trade was already behaving before the news hit.

In today’s My Trading Game Plan Revealed show, Gareth focused on the pressure building across the AI and semiconductor space, the key S&P 500 level that could define broader market risk, and the macro signals coming from yields and the dollar. The market was not only reacting to one chip headline. It was testing whether the leadership trade that carried the bull market is starting to lose structure.

That is the framework that matters now.

Semiconductors Were Weak Before the Headline

DeepSeek’s new chip announcement put immediate pressure on major semiconductor names, with Nvidia, Micron, SanDisk, and other AI-linked stocks selling off sharply in the early session. On the surface, that looks like a news reaction.

Gareth’s point was that the chart was already warning traders before the headline.

He noted that semiconductors bounced hard out of the gate in the prior session, then faded throughout the day. That type of action matters because it shows supply coming in while retail traders are still willing to chase strength. When a sector opens strong and gets sold into all day, the question becomes whether institutions are using liquidity to reduce exposure.

The DeepSeek headline did not create that concern from nothing. It gave the market a reason to accelerate what the chart was already hinting at.

That is why Gareth’s read was bigger than a one-day semiconductor move. His view is that the semiconductor cycle may be entering a different phase, where the market begins looking past current AI demand and starts pricing in future competition, supply growth, margin pressure, and weaker pricing power.

The Risk Is Margin Compression, Not Just Competition

The AI trade has been built on scarcity, demand, and premium margins. Companies tied to AI infrastructure have benefited from the belief that demand would remain strong and supply would stay tight for years.

DeepSeek challenges that story because it points toward cheaper alternatives and more efficient AI models. If models can deliver similar results with less expensive hardware, the market has to reconsider how long today’s margins can last.

That is the key point Gareth emphasized. The stock market does not wait for the current order book to disappear. It discounts what conditions may look like 12 months out.

That matters for names like Micron and Nvidia. Micron may have strong visibility into future demand, but if investors start looking beyond the current supply shortage and toward new capacity, cheaper chips, or margin pressure, the stock can still reprice lower before the fundamentals visibly weaken.

Gareth’s warning was clear: retail often buys late in the cycle because the story still sounds strongest near the top. The technicals are meant to keep traders from buying the narrative when the chart is already showing distribution.

Nvidia Is the Semiconductor Level to Watch

Nvidia remains one of the cleanest tells for the broader AI trade. Gareth pointed to a key support structure that has held before, but is now being tested again.

The important part is confirmation. A brief intraday dip below support is not the same thing as a confirmed breakdown. The level that matters is the daily close.

If Nvidia closes below support and confirms the breakdown, Gareth is watching downside risk toward $178 first, with $165 possible below that. Those levels matter because Nvidia is not just one stock. It has become a proxy for AI leadership, semiconductor momentum, and risk appetite in high-multiple growth.

If Nvidia loses structure, the read extends beyond Nvidia itself. It would suggest the market is beginning to question the leadership group that has carried the broader indexes.

The S&P 500 Is Sitting at a Bigger Decision Point

While the Nasdaq 100 is taking more direct pressure from semiconductors, Gareth’s broader market focus was the S&P 500.

The index is still holding up better than the tech-heavy Nasdaq, but it is sitting near a major technical area. Gareth highlighted a lower trendline connected to the 2021 highs, a level that previously acted as resistance and is now being tested as support.

That support test is important because of polarity. Former resistance often becomes support, but only if price can hold above it. The market has already tested this zone more than once. A failure back below it would change the structure.

If that level breaks, Gareth’s downside target is 7,000 on the S&P 500. From the current area, that would represent a meaningful decline and could shift the market from a controlled pullback into something more important.

The risk is not only the technical break. It is what that break would say about psychology.

Why the Wealth Effect Matters

Gareth tied the S&P 500 setup back to the consumer.

The lower and middle-income consumer has already been pressured by inflation, higher rates, and higher costs. The upper-income consumer has been more resilient because stock portfolios have remained elevated. That creates a wealth effect: when markets are near highs, higher-net-worth consumers feel more comfortable spending.

If the S&P 500 stops making new highs and begins rolling over, that psychology can change quickly. Falling portfolio values can slow discretionary spending, and if that spending slows, the market may begin pricing in a weaker economic backdrop.

That is why the S&P level matters. It is not just a chart line. It is a possible transmission point from market structure into consumer behavior.

Yields and the Dollar Are Adding Pressure

Gareth also tied the equity setup to two macro watchpoints: the 10-year yield and the U.S. dollar.

The 10-year yield was pressing near 4.5%, a level that matters for high-growth and high-multiple stocks. When yields push higher, the discount rate rises, and the market becomes less willing to pay premium valuations for future earnings. That is especially relevant when semiconductor and AI stocks are already under pressure.

The dollar is also sitting at a major resistance zone. Gareth noted that the DXY level has mattered repeatedly going back years, acting as resistance, then support, and now resistance again. That kind of market memory gives the level added weight.

If the dollar breaks above that zone, it could add pressure to multinational earnings, commodities, and risk assets. If it rejects there, Gareth is watching for a possible move back toward the 95 to 96 area.

The takeaway is that equities are not trading in isolation. Semiconductors are weakening at the same time yields are pressing higher and the dollar is testing a major level. That combination makes confirmation more important.

The Index-Debut Trap

Gareth also pointed to weak action around a highly anticipated Nasdaq 100 inclusion. In theory, index inclusion should create buying pressure because passive funds and ETFs that track the index need exposure.

The issue is that the stock failed to respond the way a strong name should respond.

If forced buying cannot produce sustained upside, that tells traders something. It suggests sellers may be using that liquidity to exit positions. That is a different read than simply saying the stock is down. The context is what matters.

The same logic applies across the tape. When bullish news fails to create bullish price action, the market is sending a warning. Strong stocks should respond to positive catalysts. When they do not, supply may be heavier than the headline implies.

Before publication, the exact company name and index-inclusion details in this section should be verified.

Bottom Line

Gareth’s framework today was not about chasing one DeepSeek headline. It was about recognizing that the AI leadership trade is being tested at the same time broader market support, yields, and the dollar are all sitting near important levels.

Semiconductors are the first signal. Nvidia is the key stock tell. The S&P 500 trendline is the broader market decision point. The 10-year yield near 4.5% and the dollar at long-term resistance are the macro confirmations.

As long as those pressure points remain unresolved, the market is forcing traders to respect confirmation. If semiconductors stabilize and the S&P holds support, the broader trend can stay intact. If Nvidia confirms a breakdown and the S&P loses its 2021 trendline support, Gareth’s 7,000 downside level becomes the next major framework for risk.