The AI trade had a good run. A really good run. From March to late June 2026, the Philadelphia Semiconductor Index (SOX) surged 105%, powered by insatiable demand for memory chips and AI accelerators. Then came July, and the bill arrived.
The SOX has now fallen more than 20% from its late June high, the threshold that officially confirms a bear market. In a single week, the index dropped 11%, its worst weekly performance since March 2025. That is not a dip. That is a reckoning.
What went up, came down
To understand how we got here, you have to appreciate just how vertical the preceding rally was. A 105% gain in roughly three months is not normal price discovery. It is a market on a sugar rush, pricing in a future that may arrive much later, or differently, than investors assumed.
Memory chip stocks led the charge on the way up, and names like Kioxia and SanDisk were still sitting on gains of close to 600% year to date even after the recent pullbacks. In English: even after losing a fifth of their value, some of these stocks were still up six times from January.
