The Philadelphia Semiconductor Index (SOX) was founded by the Philadelphia Stock Exchange in 1993. It is one of the four major indices in the United States. It mainly focuses on the semiconductor industry and is an important observation indicator of the global semiconductor cycle. There are 30 constituent stocks in the index, including Applied Materials, AMD, Broadcom, TSMC, Infineon, Intel, Micron, STMicroelectronics, TI, Nvidia, etc.

The Philadelphia Semiconductor Index includes the most watched large semiconductor companies and is a barometer of the global semiconductor market. Investors can conduct reasonable investment analysis and predictions by observing the index in a timely manner.

Why did the Philadelphia Semiconductor Index fall by more than 10% recently?

Since July 11, the Philadelphia Semiconductor Index has fallen by more than 10%. Due to the unsatisfactory performance of the Philadelphia Semiconductor Index some time ago, many investors have become worried about the bursting of the AI ​​chip bubble. However, some analysts believe that the performance of the index some time ago is a release of risks from excessive concentration of U.S. stocks, and it is not a long-term switch in style or an "AI bubble bursting." The main reasons that catalyzed the decline of the Philadelphia Semiconductor Index are as follows:

• Interest rate cut transactions: The market is basically convinced that the Federal Reserve will cut interest rates for the first time in September, and will cut interest rates at least twice this year. The operating environment of cyclical industries such as finance and real estate is expected to improve, and small and medium-sized enterprises with higher financing costs are also expected to receive more funds. However, US stocks have previously Large technology companies have shown an "immune" attitude towards the postponement of interest rate cuts and the rise in U.S. bond interest rates, which objectively reflects the "risk-off attribute" of monetary policy. The prospect of more certain interest rate cuts has weakened such safe-haven demand, driving funds away from large technology stocks.
• Trump trade: "Trump trade" further benefits financial, real estate, energy and other stocks, driving capital outflows from large technology stocks.
• The United States restricts chip trade: On July 17, according to Bloomberg reports, the United States has notified its allies that if companies such as Tokyo Electron and ASML continue to provide advanced semiconductor technology to China, the United States will consider taking measures The most severe trade restrictions. The news triggered a decline in U.S. stocks and even global chip stocks. On that day, the Philadelphia Semiconductor Index fell 6.8%. Among its constituent stocks, ASML fell 12.7%, Applied Materials, AMD, Marvell Technology, Ram Research, etc. all fell more than 10%, and Nvidia fell 6.6%.
• Blue screen incident caused by CrowdStrike: On July 19, Microsoft’s “blue screen” incident spread across the world. A software update problem with CrowdStrike, the US security software giant, triggered the so-called “largest IT failure in history.” Concerns about network security intensified technology to a certain extent. stock adjustment. On that day, CrowdStrike's stock price fell by more than 11%, Microsoft fell by 0.74%, and Nvidia, Tesla, TSMC, ASML, etc. all fell by more than 3%.

After falling sharply and rising sharply, chip stocks are making a comeback?

Since July 11, the Philadelphia Semiconductor Index has fallen by more than 10%. But on July 22 (yesterday), the Philadelphia Semiconductor Index surged 4%, showing a resurgence in chip stocks. As of yesterday's close, Applied Materials' stock price rose 6.28%, Nvidia's stock price rose 4.76%, and most SOX index component stocks' stock prices rose.

Citi analyst Christopher Danely said that despite the recent poor performance of chip stocks, he is still "very bullish on the semiconductor industry" and that Nvidia remains the most popular chip stock company, followed by Broadcom. However, some analysts say that with some market tools already malfunctioning, AI has little room for its ability to drive stock prices.

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