Semiconductor benchmarks such as the PHLX Semiconductor Index (SOX) sit far above prior cycle reference points after a powerful AI-driven run-up. In this configuration, sector history suggests that even very large percentage declines from recent peaks can mathematically return the index only to previously traded zones rather than uncharted lows.
Historical drawdowns in semiconductor indices and ETFs, including episodes around the dot-com bust and the Global Financial Crisis, reached roughly 45-85% without permanently breaking long-run structural demand for compute and memory. Studies of past overbought signals in the group report average eventual declines near the mid-40% area, with the most extreme case in that period near 85%.
Flagship AI-related names such as NVIDIA (NVDA), Advanced Micro Devices (AMD), Taiwan Semiconductor Manufacturing (TSM), and Broadcom (AVGO) have seen valuations expand sharply in this cycle, helping to elevate SOX levels well above 2022-2023 ranges. Within this backdrop, large downside moves would primarily represent a give-back of AI-era gains toward earlier trading zones, rather than evidence in itself of a structurally new low regime, although past cycles show that very deep crashes remain possible and pattern reliability is conditional on industry demand staying intact.
Terminology
- 01Drawdown: Peak-to-trough decline in price during a specific period.
- 02Overbought: Technical condition where prices have risen quickly and may be vulnerable to reversal.