Why This AI Drawdown Shouldn’t Rattle You
Listen to the audio version of this article (generated by AI).
Today’s AI wobble, explained… great results from Samsung, and yet the Kospi tanks… long-term perspective for short-term fears… how one trading system created 920% gains
Another day, another wobble in the AI trade…
As I write on Tuesday, South Korea’s Kospi just closed down nearly 5%, its sixth circuit-breaker halt of the year. Leading the crash was Samsung Electronics Co. Ltd. (SSNLF), falling as much as 8% in early trading after delivering its latest earnings report.
But here’s the thing: Samsung’s results were good.
The company guided second-quarter operating profit to about 89.4 trillion won ($58 billion). That’s a roughly 19-fold jump from a year ago. Meanwhile, revenue guidance came in around 171 trillion won, more than double last year’s total.
So, why did the stock get hammered?
Well, investors aren’t punishing the earnings. They’re punishing the overall setup.
Samsung shares had already roughly doubled in 2026 heading into earnings. So, it’s a classic “sell the news” situation, coupled with fears of “can the growth continue apace?”
Meanwhile, this morning also brought news that Chinese AI company DeepSeek is developing its own AI chip. This adds another layer of unease about how much room is left in the memory supercycle.
Put it all together, and “take profits on AI” is the knee-jerk reaction.
For AI investors, some broader perspective can help during moments like this
Here in the Digest, we often dig into the weeds – a Fed decision here, a tariff headline there, an earnings miss that sends a stock reeling for a day or two…
That’s our job – to help you understand what’s happening in real time.
But when we do this, we run the risk of focusing too much on short-term issues that can feel like they have lasting significance – but often don’t.
Many of the “crises” that dominate a week of headlines turn out, in hindsight, to have had real short-term consequences but little lasting impact on the market’s broader trajectory. In other words, while those headlines can be quite significant for short-term traders, they’re mostly noise for long-term investors.
Of course, this can be a problem for investors who forget this distinction. Allowing short-term pressures to affect our long-term positioning is a danger to reaching our investment goals.
Remembering where we are in the big picture is a helpful way to push back against this risk.
How history can help calm rattled nerves
Take a look at the chart below…
It’s the S&P 500 going back to 2017, with a dashed trendline running underneath – a rough approximation for the “spine” of this multiyear climb.
Every major drawdown on this chart – the 2018 selloff, the 2020 COVID crash, the 2022 bear market, last year’s tariff-driven dip – eventually found its way back down to that line before the rally resumed.
But similarly, every exaggerated spike of bullish enthusiasm eventually “came back to Earth,” so to speak. This is just the natural ebb and flow of the market.
Now look again at the chart, zeroing in on where we are today. With the S&P recently touching a fresh all-time high, we’re sitting well above that spine.
That’s not a reason to panic – or even predict an imminent pullback. But it is a reason to remember the “two steps forward, one step back” nature of investing.
A reversion to the spine for both the S&P and the AI trade would be normal
History says these gaps close eventually – sometimes gently, sometimes more violently.
Market analyst Charlie Bilello at Creative Planning ran the numbers on this last year. He studied the market since the March 2009 low, concluding that while the S&P 500 has gained over 1,000% since then (about 16% annually), the return has been anything but smooth.
From Bilello:
There have been 30 corrections since the March 2009 low of more than 5%.
Of these, 10 were larger than 10%, 4 exceeded 20%, and 1 was more than 30%…
In hindsight, it’s tempting to believe you could’ve sidestepped the losses in 2011, 2018, 2020, and 2022, receiving all of the upside since March 2009 with none of the downside. But no one has shown an ability to do so in a repeatable fashion.
Which means that large declines and the fear-inducing narratives associated with them are the price of admission for long-term investors.
And these dips aren’t rare one-off events.
Bilello has also found that in the median year since 1928, an investor in the S&P 500 has experienced a 13% drawdown at some point during the year.
Think about that. Even in “up” years, you might need to sit through a double-digit crash.
For perspective, the pullback we saw between late January and late March this year clocked in at just 9% – smaller than a typical year’s dip.
To be clear, this framework applies to technical pullbacks – prices catching up with themselves. But if earnings growth in the AI trade stalls, or an upstart like DeepSeek creates a technology that changes the economics of AI in a material way, that’s a different conversation, and a legitimate reason to reassess.
But for today, that’s not our situation. Which leaves AI investors with a question…
Which will you believe?
When that pullback comes – and per Bilello, something in that range comes with real regularity – the headlines will not be measured…
You can be sure we’ll see “bubble bursting,” “meltdown,” “the AI trade unwinds,” and so on. That’s not a guess. That’s what the financial media did during every single one of the 30 corrections Bilello just cited.
At that moment, you’ll have a choice…
You can let those headlines set your portfolio decisions for you. Or you can remember that a 10%, or even 20%+, drawdown is the toll every long-term investor has always paid.
Bottom line: Some sort of pullback is coming, and probably one that hurts. How you interpret and respond to it is what actually matters.
Now, when we shift from a long-term investing mindset to a short-term trading one, the situation changes completely.
After all, for traders, volatility creates opportunity…
How Jonathan Rose’s “Convergence Trigger” can help you profit from these selloffs
Our trading expert Jonathan Rose, editor of Advanced Notice, has created a trading system built to capitalize on moments like this.
Jonathan and market veteran Marc Chaikin call it the “Convergence Trigger” – a signal that combines Jonathan’s Unusual Trading Activity tool with Chaikin’s Money Flow to spot exactly when institutional money is piling into a stock before the move happens. Back-tested across nearly 200 trades, it produced an 81% win rate and a 147% average gain.
As we noted yesterday, Jonathan and Marc first introduced this Convergence Trigger at the end of May. Since then, traders have been using it in their own trading portfolios – and many have written in highlighting their results.
Jonathan says these traders have reported gains of 505%, 745%, and even 920% – all just in the weeks since their event.
If you want to see how it works – especially during volatile markets like today – Jonathan and Marc are making their encore presentation available free, for a limited time. Click here to watch.
Coming full circle
Let’s return to Samsung and this morning’s Kospi plunge.
Nothing about a 19-fold profit jump getting punished by an 8% share-price drop breaks the pattern we just walked through. It’s exactly the kind of headline that will dominate the financial press for a day or two, get filed under “AI bubble bursting,” and then fade from memory within a month – while the underlying growth in AI memory demand keeps compounding underneath it.
That doesn’t mean Samsung’s stock is cheap here, or that every AI dip is automatically buyable, or even that there isn’t more pain ahead. It means the instinct to treat one rough session in Seoul as a verdict on the entire AI trade is precisely the instinct Bilello’s numbers warn us against.
If you’re a long-term investor, today’s wobble is the toll you agreed to pay when you bought into AI. And if you’re a trader, today’s wobble is opportunity – which is exactly what Jonathan and Marc built the Convergence Trigger to capture.
Either way, letting fear – or the headlines engineered to produce it – drive your portfolio decisions is always the wrong call.
After all, the market doesn’t punish volatility. It punishes impulsive, knee-jerk reactions to volatility.
Have a good evening,
Jeff Remsburg