The US semiconductor and chip stocks continue to decline relentlessly—when will the correction finally end?

Recent sell-offs in the memory chip sector of US stocks can no longer be described simply as a "correction." Last night, former chip star stocks like SK Hynix, Micron, and SanDisk continued to decline collectively. The Philadelphia Semiconductor Index (SOX) has plummeted from a 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 longer will memory chips keep falling? Is the much-touted "All in AI" narrative still viable?

BIT Exchange will analyze and answer this biggest market uncertainty.

1. Technical Bear Market is Now Confirmed

A so-called 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 said to have entered a technical bear market. It involves no fundamental judgment, only price action.

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

• 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, formally breaking below the threshold and confirming entry into a technical bear market. Since then, the index has continued to decline, currently touching 10,447.49 points, moving further away from the threshold.

What do these numbers mean? They mean the "All in AI, blindly buy semiconductors" narrative has, at least in the short term, lost its effectiveness. The market is no longer following the one-sided logic of "buying every dip," but has entered a phase where risk reassessment is necessary.

2. A Bear Market Tells You How Much You've Lost, But Not How Much Longer You'll Lose

First, it must be clearly stated that a technical bear market is a "statement of fact," not a "predictive tool."

It tells you the index has fallen by more than 20%, but it cannot answer the question, "Will it continue to fall, and where is the bottom?" Historically, some technical bear markets have been the starting point for V-shaped recoveries, while others have been the opening act for deep bear markets. What makes the difference? The core factor lies in whether the source of selling pressure has been fully cleared.

Regarding the source of selling pressure in this round of memory chips, the market has nearly reached a consensus—the South Korean stock market is undergoing a severe deleveraging process, and for the memory sector to stabilize, it will likely need to wait for this deleveraging to run its course.

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

However, the problem with leveraged ETFs lies in their mechanism: a mandatory daily rebalancing of "buying on up days and selling on down days." During an uptrend, they act as an amplifier; once the trend reverses, they become a meat grinder – a decline triggers margin calls, failure to meet margin calls leads to forced liquidations, and the selling pressure from liquidations causes further declines. This is a classic negative feedback loop. Once initiated, it proceeds inexorably, beyond human control.

3. When Will Deleveraging End? Watch Three Signals

This is the truly core question. Investors may want to monitor the following three directly observable indicators:

• Signal 1: Credit Financing Balance. It peaked at 38.6 trillion KRW (June 24) → fell to 32.7 trillion KRW on July 23, but the decrease is far from sufficient. This indicator needs to stop declining and show clear signs of stabilization before we can conclude that the liquidation of 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 → fell back to 473.6 billion KRW in the first half of July. This is the most direct measure of deleveraging "blood loss." It needs to sustainably drop to a normal level – for example, below several hundred billion KRW per month – to be considered under control.
• Signal 3: Volatility Index VKOSPI. This is the "fear index" for the South Korean stock market, calculated based on the option prices of the KOSPI 200 index, measuring market expectations of intense volatility over the next 30 days. During this panic, it once spiked to 5 times the VIX and is currently still at a high level of 85.66. Only when it falls back to a normal range can we say the "fear premium" embedded in market pricing has been squeezed out.

4. Final Conclusion: The Process Isn't Over, But Mid-to-Late Stage Characteristics Are Apparent

Looking at the latest market dynamics, this round of deleveraging is clearly not yet complete.

The KOSPI has triggered circuit breakers 9 times this year, with violent swings of sharp rises and falls alternating – this is precisely a typical characteristic of the mid-to-late stage of deleveraging: the peak of panic selling has passed, selling pressure is starting to wane, but the market structure is not yet stable, making it prone to violent reactions at the slightest trigger.

Let's summarize the points above:

First, the SOX has broken below the 11,707.78-point threshold, confirming a technical bear market. The phase of the mindless "All in AI" narrative is over.

Second, the underlying driver of this decline is the forced liquidation of leveraged funds in South Korea. The bottom is not determined by where the price falls, but by where the deleveraging ends.

Third, monitor the clearing progress via three signals: stabilization of the credit financing balance, normalization of forced liquidation amounts, and the VKOSPI returning to a normal range. Based on the frequency of circuit breakers and liquidation data, we are currently in the mid-to-late stage of deleveraging – the most panic-stricken period may be over, but the "unstable structure" means that bottom-fishing at this point is still a left-side trade.

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

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Risk Disclosure: Historical data does not guarantee future performance. This article is for market observation only and does not constitute investment advice. Please make independent judgments based on your own risk tolerance.