Investors Pour $1B Into Triple Leveraged Semiconductor ETF

The Direction Daily Semiconductor Bull 3X Shares (SOXL) has lost nearly 28% this month, but investors seem to be holding onto hopes of a sentiment-driven spike. 

SOXL has taken in $1 billion in net new assets in the past week, according to FactSet data, more than any other ETF on the U.S. markets. The triple-levered bet has taken in $4.2 billion in new assets year –to date, far outpacing the $2.6 billion in inflows for the nonleveraged VanEck Semiconductor ETF (SMH). 

It’s a strange move at first glance, with SOXL losing 14% in the past seven days as the broader market wrangles with the macroeconomic consequences of war, inflation and the Fed’s aggressive talk of hiking interest rates. 

The bets appear to be primarily driven by institutional strategies, with estimates from VandaTrack suggesting that just $131.8 million of SOXL’s inflows this month were from individual accounts. 

But while semiconductor stocks have been beaten down this year, the fundamentals of the industry seem strong as supply chains reorganize and demand for chips remains strong for data centers, 5G cellular network expansion and other nonconsumer uses. There’s a distinct possibility the stocks can jump from their relative lows in the coming weeks if chipmakers outperform market expectations. 

“Sentiment is so negative right now, and you're just not going to see that in numbers and guidance,” said Matt Bryson, an analyst covering semiconductors for Wedbush Securities. “Expectations are so diminished, and results are actually going to be pretty good.” 

However, Angelo Zino, a senior industry analyst at CFRA Research, cautions that fears of a recession could send industry sentiment tumbling again. 

“If there is a recession on the horizon, the last area you probably want to be in is semiconductors, and you probably get another leg down in the stocks,” he said. 
 

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