The Philadelphia Semiconductor Index in the US dropped nearly 10% over seven days, attracting bottom-fishing capital to enter the market.

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The sell-off in semiconductor stocks has reached levels that historically often signal a rebound, attracting bargain hunters.

The Philadelphia Semiconductor Index (SOX) dropped as much as 3.6% intraday on Tuesday, widening its seven-day loss to nearly 10%, marking the largest short-term decline since November. However, the index later rallied and recouped early losses; by the market close, SOX was down 6.8% from its recent peak.

According to Bloomberg data, looking back at historical patterns over the past year, whenever SOX experienced such short-term declines, it usually saw strong subsequent performance—a 5-day average gain of 3% and a one-month average gain of over 6%. The win rate for the 5-day period is 40%, and for the one-month period is 60%.

If the sample is extended to a longer period since 1994, the results are more moderate but still positive: the 5-day average gain is about 1.9%, the one-month average gain is less than 4%, and the win rates for both timeframes are over 50%.

Bloomberg points out that, given the extremely strong earnings outlook for chip manufacturers, any pullback is likely to be limited.

However, U.S. Treasury yields remain elevated, which suppresses stock valuations and weakens their relative attractiveness. As heightened volatility in interest rates breaks the calm across asset classes, the stock market may not have truly stabilized yet.

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