Chip stocks break a bear trap after a $3 trillion rout — here are the levels bulls need to hold

Chip bulls sprang a bear trap on Tuesday. Two sessions later, the floor under it has cracked.

The PHLX Semiconductor Index ( ^SOX ) is down about 6% Thursday, slicing below 11,000 — the support that rescued the group twice since September. A bear trap is a breakdown that quickly reverses, catching traders who bet on further losses. This one only worked as long as that floor held.

The index is on track for its worst day since July and its lowest close since July 29.

All 60 stocks in a Yahoo Finance chip basket are down since Oct. 6, erasing about $3 trillion in market value, more than $800 billion of it Thursday alone. Lam Research ( LRCX ) and Applied Materials ( AMAT ) have each lost nearly 30% in that span, and AMD ( AMD ) more than 20%. Nvidia ( NVDA ) has fallen less, but on its size that's more than $600 billion.

Lam is leading Thursday's slide after reporting record revenue Wednesday night. The company said supply limits capped its outlook and that China sales will be "meaningfully down" in December.

The selling isn't sparing the giants. Meta ( META ) is shedding about $100 billion in market value after its earnings, and SpaceX ( SPCX ) and Amazon ( AMZN ) are sliding too. Still, the Nasdaq 100 ( ^NDX ) is down about 7% since Oct. 6. Chips are down nearly three times as much.

The index closed near 11,130 on Sept. 14 and again on Oct. 16. Tuesday's dip into that zone reversed sharply, springing the trap.

Thursday's break puts the 10,450-10,550 zone in focus. That's where the summer rally started on July 29. The 200-day moving average sits just above it.

On the upside, bulls first need to win back 11,000, then 12,600-12,700. That area capped rallies in August and September.

Semiconductor ETFs saw record flows over the past week, Bloomberg senior ETF analyst Eric Balchunas posted Thursday. "Buying the dip here has [a] pretty good record of working," he wrote.

There's little room to hide from the AI trade. "Every index on the planet is basically an AI index," Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments, said on Yahoo Finance's live show Thursday.

Watch whether buyers can pull the index back above 11,000 by the close. A close above it keeps the bulls' hopes alive, while a close below puts the 10,500 area in play.

Internal AI tools helped analyze interview transcripts, research, and draft this post. Humans reviewed, edited, and fact-checked this post before publication.

Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com .