January 27, 2025, saw several dozen stocks related to artificial intelligence infrastructure post lag single day drops, in many cases just days after reaching 52-week highs. The news of a large language model being developed (DeepSeek) for much cheaper than had been previously thought capable was released. Shortly after, we looked for past precedent of stocks dropping very quickly from highs and for what the playbook going forward had been.

We looked back over the past four years, and here when stocks above the $10B market cap dropped at least 15% from 52-week or all-time highs within a five-day period, and tracked their trajectory going forward.

Considering very different general market environments, it may be useful to separate the results into two time periods, 2023–2024 and 2021–2022.

Some notes on the results from above:

Separating the groups by those who made it back to 52-week highs and those who did not (using a forward one-year period from the initial low), the results are below.

A decent indicator of whether or not a stock would make it back to highs has been the 200-DMA. Not surprisingly, those with a breach of the 200-DMA made it back to highs less often.

Some examples. First from 2023–2024 we can look at four basic categories of outcomes below. For each stock example, the month in parentheses is the month of the initial drop from highs.

And from 2021–2022 we can look at four cases. Notice the very different percentage breakdowns in each category.

Now for the current batch of stocks that initially dropped sharply in January.

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Some notes on the results from above:

So overall, enough time has passed to begin judging the health of the recoveries. Clearly these types of sell-offs have acted better than 2021–2022, but are taking longer given they are coming from deeper corrections versus 2023–2024). It remains early to judge those making it back to highs versus those not, as right sides of bases are generally being built. But here are three examples of stocks in the group:

Kenley Scott, Director, Global Sector Strategist at William O’Neil + Company, was the lead author and made significant contributions to the data compilation, analysis, and writing for this article.

The William O’Neil + Co. Research Analysts made significant contributions to the data compilation, analysis, and writing for this article.

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