A 15% drawdown in semiconductor and AI infrastructure stocks this July has erased months of gains, yet historical data shows every similar dip in Cadence Design Systems since 2010 was followed by positive returns within 12 months.
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Momentum stocks slide 15% in July as history backs dip buyers
Semiconductor and AI infrastructure momentum stocks fell as much as 15% in July, the sector's sharpest pullback since late 2024, as investors rotated out of high-beta growth names.
"The historical pattern across five similar drawdown events since 2010 is remarkably consistent — each was followed by a positive return within 12 months, with a median gain of 38%," according to an analysis of Cadence Design Systems, a semiconductor design software company whose stock is down about 15% from its recent high.
The analysis tracked five occasions since 2010 where CDNS fell at least 20% within a 30-day window. In every case, the stock recovered to post a positive return over the following year. The median worst-case scenario for dip buyers was an additional 5% decline before the recovery began. The median time to peak return after a dip event was 354 days.
The selloff in momentum stocks comes as investors reassess the durability of AI-driven revenue growth after a prolonged rally. Cadence, which raised its 2026 revenue growth outlook to 17% and reported a record backlog of $8 billion, grew revenue 13.4% over the past year with an operating cash flow margin of 29% — fundamentals that support the dip-buying thesis, according to the analysis.
Semiconductor Selloff Spreads Beyond CDNS
The drawdown extended beyond individual names. The Invesco S&P SmallCap 600 Revenue ETF, which holds a 16.4% weighting in industrials and 17.3% in technology, posted a 1-year return of 34.14% as of July 17 but carries a 5-year maximum drawdown of 38.33%, according to fund data. The broader SPDR S&P 600 Small Cap Growth ETF, with a 19% weighting in industrials and 17.7% in technology, showed a lower 5-year max drawdown of 29.17% and a 1-year return of 27.31%.
What History Says About the Next 12 Months
The five CDNS dip events occurred in March 2025, January 2024, January 2022, March 2020, and August 2011. The median 1-year return after these events was 38%, with a median peak return of 52% reached in about 354 days. The worst drawdown among the five — the March 2020 Covid selloff — produced a 121% return over the following 12 months.
For investors considering buying the dip, the key question is whether the underlying business remains intact. Cadence's fundamentals — 13.4% revenue growth, a 29% operating cash flow margin, and an $8 billion backlog — suggest the company's AI-driven design software business is not broken, according to the analysis.
This article is for informational purposes only and does not constitute investment advice.
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