U.S. semiconductor chip stocks keep falling, how long will this correction last?

The recent sell-off in the US-listed memory chip sector can no longer be described as a mere "correction." Last night, former chip star stocks like SK Hynix, Micron, and Sandisk continued to decline collectively. The Philadelphia Semiconductor Index (SOX) has plunged from its high of over 14,600 points a month ago to its current level of over 10,400 points.

Now, all investors are asking the same question: How much further will memory chips fall? And is the much-touted "All in AI" narrative still viable?

BIT Brokerage will analyze and answer this major market question.

1. A Technical Bear Market is Confirmed

A Technical Bear Market is a concept defined purely by price decline: when an index or asset falls 20% or more from a recent significant high, it is considered to have entered a technical bear market. It involves no fundamental judgment, only price.

Applying this to the Philadelphia Semiconductor Index (SOX), we can calculate the following figures:

• On June 22, the SOX hit an all-time closing high of 14,634.72 points.
• The bear market threshold is: 14,634.72 × 80% = 11,707.78 points.
• On July 17, the SOX closed at 11,673.89 points, officially breaking below the threshold and confirming entry into a technical bear market. The index has since continued to decline, currently touching 10,447.49 points, moving further away from the threshold.

What does this figure mean? It means the "All in AI, blindly buy semiconductors" narrative has, at least in the short term, lost its validity. The market is no longer operating on the simplistic logic of "buy the dip," but has entered a phase requiring a reassessment of risk.

2. The Bear Market Tells You How Much Has Been Lost, But Not How Much More is to Come

First, it must be clear: a technical bear market is a "statement of fact," not a "predictive tool."

It tells you the index has fallen over 20%, but it cannot answer "will it continue to fall, and where is the bottom?" Historically, some technical bear markets have been the start of a V-shaped recovery, while others have been the beginning of a deep bear market. What makes the difference? The core issue lies in whether the source of selling pressure has been exhausted.

Regarding the source of selling pressure in this memory chip downcycle, the market has almost reached a consensus – the South Korean stock market is undergoing a severe deleveraging process, and the memory sector is unlikely to stabilize until this deleveraging is complete.

Since the start of the year, Korean retail investors, using margin financing and leveraged single-stock ETFs, have heavily bet on leading stocks like Samsung and SK Hynix. The balance of credit financing surged from 27.4 trillion KRW in early January to a peak of 38.6 trillion KRW on June 24.

The problem with leveraged ETFs lies in their mechanism: they are forced to rebalance daily by "adding positions when prices rise and reducing them when prices fall." In an uptrend, they act as amplifiers; once the trend reverses, they become meat grinders – a decline triggers margin calls, missed margin calls lead to forced liquidations, and the selling pressure from liquidations causes further declines. This is a classic negative feedback spiral that, once initiated, operates beyond human control.

3. When Will Deleveraging End? Watch for Three Signals

This is the truly core question. Investors can focus on the following three observable indicators:

• Signal 1: Credit Financing Balance. It fell from a peak of 38.6 trillion KRW (June 24) to 32.7 trillion KRW on July 23, but this decline is far from sufficient. This indicator needs to stop declining and show clear signs of stabilization to indicate that the process of unwinding margin positions is nearing its end.
• Signal 2: Forced Liquidation Amount. It was about 550.8 billion KRW in March, surged to 1.12 trillion KRW in June, and then dropped to 473.6 billion KRW in the first half of July. This is the most direct "bleeding volume" of deleveraging. It needs to consistently fall back to normal levels – for example, below a few hundred billion KRW per month – for the bleeding to stop.
• Signal 3: Volatility Index VKOSPI. This is the "fear index" for the Korean stock market, calculated from the option prices of the KOSPI 200 index, measuring the market's expectation of severe fluctuations over the next 30 days. During this panic, it once soared to 5 times the VIX and is currently still at a high level of 85.66. Only when it drops back to a normal range will the "panic premium" priced into the market be fully squeezed out.

4. Final Conclusion: The Process Isn't Over, But Characteristics of the Middle-to-Late Stages Are Visible

Based on the latest market conditions, this wave of deleveraging has clearly not run its course.

The KOSPI has triggered 9 circuit breakers within the year, with sharp gains and losses alternating – this is precisely a typical characteristic of the middle-to-late stages of deleveraging: the peak of panic selling has passed, selling pressure is beginning to ease, but the market structure is not yet solid, leading to violent swings at the slightest provocation.

To summarize the above points:

First, the SOX has broken below the 11,707.78 threshold, confirming a technical bear market and ending the mindless "All in AI" narrative phase.

Second, the underlying driver of this decline is the forced deleveraging of leveraged Korean funds. The bottom is determined not by where the price falls to, but by the extent to which leverage is cleared.

Third, monitor the clearing progress using three signals: stabilization of the credit financing balance, return of forced liquidation amounts to normal levels, and the VKOSPI dropping back to a normal range. Based on the frequency of circuit breakers and liquidation data, we are currently in the middle-to-late stage of deleveraging – the most panic-stricken phase may be over, but the "unstable structure" means that buying the dip now is still a contrarian move.

For market participants, what is truly useful at this stage is not predicting the bottom's exact level, but establishing a discipline of "signal confirmation": control positions and leverage before signals stabilize; discuss deployment strategies only after signals are confirmed.

In response to the complex market environment, BIT Brokerage's margin trading and options services provide traders with multi-dimensional risk management and capital efficiency enhancement pathways:

Margin Trading: Using margin buying can improve capital utilization during significant market pullbacks to participate in structural rebounds. Using short selling can establish short positions against targets directly impacted by price wars and under pressure on fundamentals, hedging the downside risk of your holdings.

Options: Traders can build a downside protection net for their overall portfolio by buying Put Options, guarding against unexpected macroeconomic headwinds and liquidity shocks. They can also participate in the elastic returns of high-beta assets with limited and fixed costs by buying Call Options.

Risk Warning: Historical data does not represent future performance. This article is solely a market observation and does not constitute investment advice. Please make independent judgments based on your own risk tolerance.