One day before Wall Street suffered one of its steepest selloffs in a year and a half, some of Israel’s most senior investment managers were already warning that the enormous sums pouring into artificial intelligence and technology stocks were creating new risks, with one executive cautioning that the next major crisis could emerge from the debt of technology companies.
Within 24 hours, the risks they had been discussing were suddenly visible on trading screens around the world. On Thursday, the Nasdaq plunged 5.5%, the S&P 500 lost 4.4% and the Philadelphia Semiconductor Index fell about 12%. Panic eased on Friday, when the Nasdaq rebounded 1.1% and the S&P 500 gained 0.3%, while the Dow Jones Industrial Average slipped 0.5%, but the recovery erased only part of the previous day’s losses.
Israeli investors warned of AI debt crisis one day before Wall Street’s tech crash
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Tel Aviv also rebounded sharply after the selloff, with the TA-35 jumping 3.09%, the TA-125 rising 2.81% and the banking index climbing 4.52%. The turmoil is particularly significant for Israel’s institutional investors because of their substantial exposure to semiconductors. A Calcalist analysis based on holdings at the end of June 2026 found that Israeli institutions held about 29.3 billion shekels in shares of 10 chip companies, including Nvidia, TSMC, Broadcom and Micron, as well as another 8.4 billion shekels in VanEck’s SMH and iShares’ SOXX semiconductor ETFs. Together, the holdings amount to roughly 37.7 billion shekels, assuming there is no overlap between the datasets, and do not include additional exposure through funds tracking broader indexes such as the S&P 500 and Nasdaq-100. Their exposure to Israeli chipmaker Tower Semiconductor alone stood at nearly 19 billion shekels, while Tower shares plunged 12% on Thursday.
Just one day before the market turmoil, senior Israeli investment executives had gathered at a closed conference organized by the country’s Family Office Association, headed by Reuven Titouani, owner of the Talpiot agency. Family offices manage the finances of wealthy families, in some cases overseeing hundreds of millions or billions of shekels, making them an especially attractive audience for insurance companies and investment houses. Representatives from nearly all of Israel’s major institutional investors attended, and two panels focused on equity exposure and, in particular, the risks surrounding U.S. technology stocks. There was no single consensus, but several executives issued significant warnings, and some said they had already begun shifting money from stocks into bonds.
The sharpest warning came from Tamir Hershkovitz, chief investment officer at Ayalon. “It could be that the next major crisis will be a debt crisis among technology companies,” he said. Hershkovitz argued that the huge investments being made in AI infrastructure are increasingly financed through debt and warned that a crisis could develop within two or three years. Technology and semiconductor companies operate in cyclical industries, he noted, meaning today’s enormous investment wave could itself become a source of significant risk if demand fails to match expectations.
Clal Insurance has already begun reducing some of that risk. Barak Bensky, head of its investment division, said the company shifted some money from equities into long-term foreign bonds about a month ago. One of the biggest dangers facing markets, he said, is that the pace of AI investment may fail to meet the lofty expectations already reflected in stock prices. Yotam Eironi, head of foreign equities at Altshuler Shaham, also warned that a slowdown in data-center construction could create excess production capacity for processors and chips in the coming years, making it essential to distinguish between profitable, stable companies and those whose valuations rely heavily on future growth. Migdal executives, meanwhile, highlighted the heavy concentration of the S&P 500. Asked whether savers whose entire pension and long-term savings are invested in an S&P 500 tracking fund should diversify, Maria Yuskovitch replied: “Absolutely. There is room for diversification in investments.”
‘Just dump it, just sell’
The pressure was already being felt by Israeli investment managers in local trading. A senior executive at one institutional investor described trading around the latest index update as highly unusual. “It was real madness. Just dump it, just sell,” he told Calcalist. Normally, he said, a steep fall in a stock being removed from an index draws bargain hunters. This time, almost no buyers appeared. “Stocks we held were down 10%, down 15%, and nobody came to buy.” The absence of buyers, he said, only intensified the declines.
Not everyone at the conference was pessimistic. Carmel Kenny of Yelin Lapidot expressed confidence in long-term equity investing, particularly in technology and semiconductor stocks, while stressing the importance of diversification. Yoav Caspi of Phoenix pointed to expected earnings growth among large companies as a reason to continue holding them, while Harel Finance Chief Investment Officer Ronen Kaploto warned against trying to time the market. Raanan Shani of Aspire and Shahaf Buchris of Hachshara also urged investors not to panic over short-term volatility or make hasty portfolio changes.
But the timing gave the warnings unusual weight. Israel’s investment chiefs spent Wednesday debating whether AI spending, semiconductor valuations and heavy concentration in U.S. technology stocks had become dangerous. By Thursday, the Nasdaq was down 5.5%, chip stocks were leading a global selloff and the risks they had described were no longer theoretical.