A 50% drop in stock price might sound like a bargain. But on Wall Street, it is often just the beginning of a much larger decline.
At present, the stock prices of popular targets such as Intel, Arm ( Arm ), SanDisk ( Sandisk ), and CoreWeave have all fallen below half of their highs for 2026; moreover, for the chip sector, this is the first time since 2017 that its valuation has been lower than that of the S&P 500 index.
On Monday morning, the stock market rebounded, with most chip stocks continuing the upward trend from last Friday. NVIDIA had previously tumbled by 8%, but later managed to recover some of its losses; Intel's shares rose by more than 3%.
Senior trader Michael Martin is not tempted by this. "A lower stock price only means a reduction in market value; it does not equate to an increase in investment value." Martin is the founder of TraderMindset.com and has worked alongside Wall Street legend Victor Spelandiou.
In an interview with Yahoo Finance, he said, "The line from the movie character Gordon Gekko always echoes in my mind: ‘It’s pure luck that a fool and his money can get together.’"
What he is more concerned about is that some traders convince themselves and hold onto their positions stubbornly. "It's important to distinguish between the thinking of investors and that of traders. If you are engaged in short-term trading, then you must adhere to the logic of trading."
Intel's Long and Twisted Stock Price History
Martin uses Intel as a typical example: “Many people might think, wow, Intel once reached $125, and now it’s available for just half that price, so it’s a great deal. But the reality is that even if the stock price drops to $55, it’s more likely to fall further to $40 rather than rebound to $140.”
Intel's historical trend has confirmed his view. In August 2000, the stock reached a high of around $75, but by October of the same year it had halved in value, and then continued to decline, falling to around $13 in 2002.
It wasn't until April 24, 2026, that Intel's stock price finally broke through its historical high of 2000. Investors who had held on for a long time experienced a brief moment of joy, with the stock price soaring to around $141 in June; however, subsequently, a wave of selling in the AI sector hit, and on October 30, the stock price fell back below the highs of the bubble era. Last Friday, Intel closed at $56, still showing a gain of about 50% for the year.
Most of the leading companies during the internet bubble era encountered similar situations. Yahoo Finance estimates that five other leading companies from that era continued to experience significant declines after their stock prices were halved for the first time: Microsoft's stock price fell another 30% subsequently, and Amazon's stock price even tumbled an additional 88%.
Of course, this doesn't mean that the logic of long-term investment is wrong. Today, Amazon's stock price has reached nearly 50 times the peak of 2000.
But that is the time scale of long-term investors. If we use the criteria of long-term investment to judge a short-term trade, risks will follow.
How to prevent transactions from turning into significant losses
Martin, with forty years of experience in subjective trading, offers a few reference points (which are not set in stone as absolute rules):
- Keep the position size small. If you are only engaged in scalping or betting on rebounds, for an account with $100,000, it is recommended to control the single investment at $100, which is one thousandth of the total capital.
- Don't keep holding onto losing positions. "If you bought on Tuesday and are still losing money by Friday, you must consider disposing of that position."
- Recognize your own time frame. Young investors “can buy high-quality companies and hold them for the long term.” For those approaching retirement, “the top priority is to take a defensive stance.”
- If you're not sure, it's better to stay out of the market and wait and see. "Put some cash in your pocket and patiently wait for the right opportunity."
Martin's final principle comes from Paul Tudor Jones, a legend in the hedge fund industry: Only when the potential return is at least $5 is it worth taking a $1 risk, which means the risk-reward ratio must be at least 5 to 1. Martin stated, "This doesn't mean that the market will definitely pan out as expected, but before opening a position, there must objectively be a potential profit margin."
"In current markets like this, you must see extremely high profit-loss asymmetry opportunities before it's appropriate to take action."
