Chip stocks plunge, dealing a heavy blow to bulls, while short sellers book $32 billion in paper gains in 7 days.

Semiconductor stocks suffered a historic selloff, delivering hefty gains to investors who dared to short them. For most of the past year, semiconductors had been one of the best-performing sectors in the U.S. stock market. According to data from S3 Partners LLC, as the Philadelphia Semiconductor Index fell more than 12%, traders who bet against the market over the past seven days are estimated to have reaped $32 billion in total paper gains. The chip-stock benchmark, known by the ticker SOX, fell Friday for an eighth straight session, matching its longest losing streak since 2006.