AI Stocks Lose 5 Trillion as Broader Market Gains

Major artificial intelligence and semiconductor stocks have lost approximately $5 trillion in market value since October 6, according to Yahoo Finance calculations. Despite the sharp decline, the broader US stock market has remained relatively resilient, with 625 other large-cap companies collectively adding $1.3 trillion in market value.

Nvidia and Alphabet each shed approximately $835 billion in market capitalization, while Intel lost nearly half its value during October. The S&P 500 also declined during the latest week, but nine of its 11 sectors gained approximately 1% or more, a weekly performance not recorded since at least 1999, according to Yahoo Finance.

Jeff Hirsch, editor of the Stock Trader's Almanac, described the market reaction as "Octoberphobia." He views the recent decline as a potential buying opportunity rather than a reason to abandon equities.

Hirsch explained his decision to purchase additional shares despite the market turbulence.

"I did buy some today... this is an opportunity here," Hirsch told Yahoo Finance on Friday.

He also argued that the market damage had been overstated compared with the headlines surrounding the sell-off.

"The damage isn't as bad as the headlines are," Hirsch said.

Historical market performance provides another basis for his optimism. The Stock Trader's Almanac identifies a favorable seasonal period beginning in the fourth quarter of a midterm election year and extending through June of the following year.

The publication describes this period as the "sweet spot" of the presidential election cycle.

Historical figures show that the S&P 500 advanced in all 19 comparable periods since 1950, measured from the final October close of a midterm year through the following June. The median gain was approximately 15%, according to the Stock Trader's Almanac data cited by Yahoo Finance.

Semiconductor stocks also recorded positive results across eight comparable cycles since 1994, with a median gain of approximately 22%. However, the historical sample is relatively small, and the sector experienced additional declines before recovering in 2002 and 2018.

The iShares Semiconductor ETF, known as SOXX, dropped approximately 17% in October but remains more than 50% higher this year. On Friday, the fund briefly fell to $460, below its July 29 low of $464, before recovering to close at $472.

This recovery created what market analysts describe as a "bear trap," a temporary breakdown below a previous support level followed by a rebound. Hirsch considers the seasonal outlook favorable for semiconductor investments.

He explained why his firm decided to enter the sector again despite the recent volatility.

"Historically, seasonally, it sets up great for this period of time, the best months of the year for semiconductors," Hirsch said.

His firm placed a new buy order in the semiconductor sector on Friday. However, the market still faces several technical levels that could determine its next direction.

For SOXX, a recovery above approximately $524 would represent an important step toward the early-October high near $596. Conversely, a break below the July low could expose the February-April trading range near $370, approximately 21% below Friday's closing price.

Other market observers remain more cautious about the outlook. Michael Hartnett of Bank of America pointed to rising global interest rates as a continuing threat to equities.

Hartnett summarized his position with the assessment that markets remain "risk-off until global rate hike ends," citing 42 central bank rate increases worldwide over the preceding six months.

The Federal Reserve maintained its interest rates on Wednesday, although two officials voted in favor of an increase. Hartnett identified $520 as the critical level for the VanEck Semiconductor ETF, known as SMH, which finished Friday near $522.

For SOXX, that threshold translates to approximately $469, slightly above the July low of $464 that the fund narrowly defended during Friday's trading session.