The semis have gotten pummeled this week with a decline of more than 10%. After more than doubling from late March through June 22nd and posting its best quarter ever in Q2, the Philly SOX semis index is currently in a 23% drawdown from all-time highs.
As painful as this week’s drop has been, it’s still not the low point of the second half. At its late-July low, the SOX was down 28.6% from the June peak before staging a rally that came up short of a new high in early October. This week’s selling has erased most of that rebound, so the question now is how bad things could get if the AI trade really unwinds.
The run higher was so vertical that even a historically severe drawdown wouldn’t undo all that much.
The chart below shows the SOX over the last five years, with dashed lines marking where the index would be after declines of 50%, 75% and 85% from its peak. A 50% drop, a level that would make headlines as a “crash,” would take the SOX down to roughly 7,317. That’s where the index traded as recently as March 30th of this year, less than seven months ago. From here, that’s a further decline of 36%.
You have to go much further down before the drawdown starts wiping out years of gains. A 75% decline would put the SOX at 3,659, which is right around the April 2025 tariff-crash lows.
An 85% decline, roughly what the semis suffered when the dot-com bubble burst, would leave the index at 2,195. That’s essentially a retest of the October 2022 bear market low.
The point isn’t that a decline of that magnitude is coming. It’s that the run from March to June was so extreme that the semis could give back half their value and only be back to where they were in the spring. For investors who bought in the last few months, though, the math looks a lot uglier.
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