The AI trade just had its scariest October in years. The rest of the stock market barely noticed.

The biggest AI and chip stocks have shed about $5 trillion in market value since Oct. 6, by Yahoo Finance calculations. Nvidia (NVDA) and Alphabet (GOOGL) have each given up roughly $835 billion in market cap, and Intel (INTC) lost nearly half its value in October.

Everything else? The other 625 large US stocks in that tally added about $1.3 trillion. And while the S&P 500 (^GSPC) slipped this week, 9 of its 11 sectors rose about 1% or more, something that hadn't happened in any week since at least 1999, by Yahoo Finance calculations.

Yahoo Finance

Jeff Hirsch, editor of the Stock Trader's Almanac, has a name for this: "Octoberphobia." And he's buying the sell-off.

"I did buy some today... this is an opportunity here," Hirsch told Yahoo Finance on Friday. "The damage isn't as bad as the headlines are."

Hirsch also has the calendar on his side. October selloffs like this one often lead into what the Almanac calls the sweet spot of the presidential election cycle, which runs from the fourth quarter of a midterm year through the following June.

History is on the buyers' side

From the last October close of a midterm year to the end of the following June, the S&P 500 has risen 19 times out of 19 since 1950, with a median gain of about 15%. Chip stocks have been 8-for-8 since 1994, with a median gain of about 22%.

Yahoo Finance

The ride wasn't always smooth. Chips fell another 11% or so before turning higher in 2002 and 2018, and eight cycles is a relatively small sample.

Chips just sprang a possible bear trap

The iShares Semiconductor ETF (SOXX) tumbled about 17% in October, yet it's still up more than 50% this year.

On Friday, it dipped as low as $460, below the $464 low from July 29 that marked this summer's bottom. Then it closed at $472, back above that line. That's the look of a bear trap — a breakdown that reverses, catching traders betting on more losses.

Chip stocks briefly broke below their July low Friday, then closed back above it. · Yahoo Finance AlphaSpace

Hirsch likes the timing. "Historically, seasonally, it sets up great for this period of time, the best months of the year for semiconductors," he said. His firm placed a new buy in the sector on Friday.

Bulls first need to reclaim about $524, the top of last week's bounce, then the early-October high near $596. Losing the July low would put the February-April range near $370 in play. That's about 21% below Friday's close.

The case for waiting

Not everyone is loading up the shopping cart.

BofA's Michael Hartnett said it's "risk-off until global rate hike ends," pointing to 42 central bank rate hikes worldwide over the past six months. The Fed held on Wednesday, but two officials voted to hike. Hartnett's line in the sand for chips is $520 on the VanEck Semiconductor ETF (SMH), which closed Friday near $522. On SOXX, that works out to about $469, just above the July low it barely held.